Avoiding gift tax

[JoshinNC]

I know, planning questions should wait until after the busy season, but this one needs some attention.

Client owns a home with a value of $600,000. Due to her husband's recent death her basis is $375,000 (her $75,000 + $300,000 step up @ his death). She wants to pass it to her son and his wife as efficiently as possible. She won't live in the house, as she is going to move to the family home on the coast to finish out her years. Can they do an installment sale, at market interest rates, with payments of $2000 per month and then she would forgive $12000 worth of payments from her son and $12000 from his wife each year as a gift? Then, at her death, she can forgive the remainder of the amount due, which would be part of her estate? Do I have this all wrong? Is there a better way, tax wise, to handle this? Maybe a trust arrangement?

Any help is greatly appreciated.

[abby]

efficiently

Josh,

What else is in the estate? If efficiency is desired, gifting it to them in one year might be all that is needed if the estate is less than 2 million.

[JoshinNC]

We thought about that

There's the beach home, worth about $400,000 and some personal property and investments at about $150,000. However, she's a fairly healthy woman and is only 62 years old (her husband was 30 years her senior), so she's most likely going to live a decade or more. With the inability to determine the estate tax exclusion with any certainty we were scared to do an outright gift. My belief is that the exclusion will go to $4 - $5 million and we'll be OK.

[jainen]

What is so urgent

>>this one needs some attention<<

What is so urgent about a healthy 62 year old widow doing estate planning? Who exactly is your client?. If it's the kids, are they just in a hurry to tie things up before she gets over her grief and begins to see things more clearly?

[JoshinNC]

Actually, both the kids and the mom are client's of mine

>>this one needs some attention<<

What is so urgent about a healthy 62 year old widow doing estate planning? Who exactly is your client?. If it's the kids, are they just in a hurry to tie things up before she gets over her grief and begins to see things more clearly?

Her goal is to get them the property at it's current value before it appreciates another 50 -100%. I think the outright gift is the best option, all things considered.

[jainen]

that makes sense

>>Her goal is to get them the property at it's current value before it appreciates another 50 -100%<<

Ah, that makes sense. She couldn't wait until after tax season, because the property might double in value by then!

[JoshinNC]

Ha, Ha, Ha!

The area the home is in is appreciating rapidly. And, as we know, when you get a client's thinking about planning for the future it's best to help them before they find other things to do. We, as humans, tend to have short attention spans, particulary when it comes to managing our finances and end of life arrangements.