The Obama victory also may lead some millionaires who were hesitating to take advantage of current rules on gifts to fund trusts they’ve set up, said Linda Beerman, manager of the wealth strategies group at Atlantic Trust. The firm is the private wealth-management unit of Atlanta-based Invesco Ltd.
Legislation enacted in 2010 raised the lifetime estate-and- gift-tax exclusion for 2011 and 2012. This year individuals can transfer up to $5.12 million --- or $10.24 million for married couples -- free of estate and gift taxes. Those levels are scheduled to expire at the end of 2012 and Obama wants to set the estate tax threshold at $3.5 million while dropping the gift-tax exemption to $1 million as it was in 2009.
“People are really rushing here at the end to take advantage of it,” Beerman said.
Wealthy families should consider setting up trusts under current rules that can benefit grandchildren or future generations and set them up in states such as Delaware, which let the entities exist in perpetuity, said Johnson of JPMorgan. The Obama administration has proposed curtailing the benefits of such trusts as well as limiting discounts taken when transferring illiquid assets in its most recent budget proposal.
Decisions about making charitable contributions this year are more complicated, Beerman said. While deductions for donations probably will be more valuable next year if rates are higher, limits on itemized deductions for those with higher incomes are scheduled to be reinstated next year, she said.
“They need to start crunching some numbers,” PwC’s Saccacio said of wealthy taxpayers. “This year, year-end tax planning takes on a heightened significance given the fact that we’re going to have this jump in rates next year unless we have an 11th-hour adjustment.”