The scheduled reduction in the federal transfer tax exemption has produced more urgent advice than it deserves. A client is told that a window is closing, that gifts must be made this year, and that the alternative is a tax bill their family will resent. Each of those statements can be true. None of them is true merely because the date is approaching.
The useful question is narrower. Can you give away enough, permanently, to move the needle — without giving away what you will need? For most households the honest answer is no, and for them the sunset is an event to be observed rather than acted upon. Their exemption will remain more than sufficient, and a hurried transfer will cost them flexibility they will want back.
Three circumstances change that. The first is an estate comfortably above the reduced threshold, where the difference between acting and waiting is measured in real money. The second is an asset expected to appreciate sharply — a company approaching a sale, a parcel about to be entitled — where the transfer moves future growth as well as present value. The third is a client whose plan already contemplates a substantial gift for reasons that have nothing to do with tax; for them the calendar is simply a reason to finish.
Where a transfer is right, the work is not the gift. It is the record: independent valuation, contemporaneous documentation of the restrictions being valued, and an allocation of generation-skipping exemption made deliberately rather than automatically. A gift made in December and documented in April is a gift made twice, the second time by an examiner.
We would rather have this conversation early and conclude that nothing need be done than have it in the last week of the year and conclude the same thing at greater expense.
