Life Insurance and Estate Gifting

by Peter Katt

The current estate and gift tax situation presents a significant planning opportunity for making gifts prior to December 2012.

The estate and gift exemption credit for 2012 is $5.12 million per taxpayer, up from $5 million last year. The current law also provides for “portability.” Portability allows a surviving spouse to preserve a deceased spouse’s unused estate tax exemption by filing a federal estate tax return. Couples both dying prior to the end of 2012 can pass $10.24 million to heirs free of transfer taxes, with a tax rate of 35% on the excess. Under the integrated estate and gift tax system, individuals can gift up to $5.12 million over their lifetime without the payment of gift taxes. This means a couple can gift $10.24 million over their lifetime without tax.

But before popping the champagne corks, you need to understand that the current law expires on December 31, 2012, and if the exemption is lowered, you won’t be able to transfer this amount tax free. What you do get is the earnings on the gift, so making as large a gift as possible now is usually the best strategy.

...To continue reading this article you must be registered with AAII.

Gain exclusive access to this article and all of the member benefits and investment education AAII offers.
JOIN TODAY for just $29.
Log in
Already registered with AAII? Login to read the rest of this article.

Register for FREE
to read this article and receive access to future articles.
Peter Katt CFP, LIC, is sole proprietor of Katt & Co., a fee-only life insurance advising firm located in Kalamazoo, Michigan (269/372-3497);


anoyn. from South Carolina posted over 2 years ago:

Interesting article. I wish I had that issue! What is the best method to gift some funds now that the kids can access?

David from Maryland posted over 2 years ago:

Mr. Katt,

in an unrelated question, I was interested in your thoughts on the Bank On Yourself/Nelson Nash-Infinite Banking Concept as an exclusive retirement program.

I am a devout devotee to this idea and, if used early and properly, the power and flexibility it can provide. After ten years in the FS business and a militant opponent to anything government sponsored or stock market based, I find this to be a credible direction for retirement savings and lifetime financing.

Your expert thoughts would be appreciated.

Dave Wilson

Charles from Texas posted over 2 years ago:

I would like to know how Peter's article applies if you have a "LIVING TRUST" (ie. BY-PASS TRUST, DISCLAIMER TRUST). CHARLIE S

Leonard from Connecticut posted over 2 years ago:

People who can benefit from this article probably have their professional paid advisors and are not likely to be AAII members.

You need to log in as a registered AAII user before commenting.
Create an account

Log In