Estate taxes and gifits to Children

[William Bannister]

Has anyone taken the steps to give there child assets in the form of equity in property? Would it be in my best interest to do this as I get older to get rid of my property without my son getting taxed on it? I already have over 4 mil in equity. By the time I die it could be 10 million. Does the fed estate tax start at 5 million for exemption per married person? If for example: I give away 1 million to my son over 20 years would this be against my 5 million exemption? Is it legal to give a child equity in a property as a gift which is accompanied by monthly cash flow? We are planning to move to Florida for retirement tax purposes.
Any estate planning attorneys in the house?

[Frank Gallinelli]

@William Bannister This area is so complex that you shouldn't take any action without reviewing it with a CPA and/or estate attorney. I'm neither, but having investigated this same topic recently, I can at least give you a couple of clues.

I believe the federal gift tax and estate tax are now unified, so gifts during your lifetime do eat into your estate tax allowance. A possible additional "gotcha" however is your state's estate tax. The limit there may be less than the federal, and gifts during your lifetime may or may not eat into the state allowance. Every state is different, so even if you have no federal estate tax you could have one with your state.

Another consideration when gifting an interest in real estate is the question of basis. My understanding is that a gift of such interest carries its current basis, but if that interest is inherited then the recipient has a basis that is "stepped up" to the value at the time inherited -- a benefit to the heir.

I haven't really given you any usable answers, but i hope I've suggested some questions you should investigate with your accountant or lawyer.