To Gift or Not To Gift- The Estate Planning Question of 2016

Client Alerts · October 3, 2016

The IRS has issued proposed regulations that will eliminate the very common strategy of putting valuable assets (including commercial real estate and family businesses) into limited partnerships and reducing the value in the property to reduce gift and estate taxes. Traditionally these gifts were not valued at the fair market value (defined in current Regulations as the price at which property would change hands between a willing buyer and a willing seller, when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of the relevant facts) but instead valued with a discount (in the 20-40% range) for minority interests or lack of marketability. In addition the proposed Regulations introduce a new concept to the planning and pull back an asset within three years of death at its fair market value, not the discounted value.

The Proposed Regulations are in draft form and not yet final. There is a scheduled hearing on December 1, 2016. The Regulation will not become final until 30 days after the Regulations are in final form.

If you are considering making a gift of an interest in family business or commercial real estate you should consider whether or not to do it this year. The decision of what and how to gift is very individual. There are many gifting options available.

If you would like to discuss this further please contact Chair of the Closely Held Business Department, Robert P. Maloney at 617 456 8008 or rmaloney@princelobel.com.