ESTATE AND GIFT TAX PLANNING

2009 Year-End Estate and Gift Tax Planning

Dear Client,

If you're like most people, you don't like to think about planning your estate. But it's an important part of ensuring financial security of your loved ones. One of the most common tools used in estate planning - one the everyone can at least give careful consideration to- is a program of giving gifts. A carefully planned gift-giving program can reduce the amount of your estate that is subject to tax while still passing on wealth.

While large gifts are subject to gift taxation, you can give away up to $13,000 in 2009 per recipient per year free of gift tax. These gifts also do not reduce the amount that ou can pass free of gift tax ($1 million lifetime exclusion, adjusted for inflation each year; $2 million if gifts are "split" with a spouse).

There is a great deal of flexibility in the types of property that can be transferred. Gifts that qualify for the $13,000 annual exclusion can be made in money, property such as stocks or bonds, or even a life insurance policy, as long as the recipient gets the present right to possess or use the property. The gift may be in trust if the terms of the trust give the recipient immediate right to the property or income from the property.

You can give up to $26,000 in 2009 per recipient per year if you're married and your spouse consents to "split" your gifts. This is useful for spouses who do not own an equal amount of property. The spouse with less property can consent to gifts made by the wealthier spouse, thereby effectively doubling the amount that the wealthier spouse can give away tax free. To take advantage of "gift spliting," both spouses must be U.S. citizens or residents. The consent must be given on a gift tax return, so a return must be filed even if no gift tax is due. However, a short from gift tax return is available.

One important thing to remember when you make a gift is that the recipient must take your basis in the property. This means that if the recipient sells the property, any gain on sale will be measured using what you paod for the property, not what the property was worth when he or she received it. In contrast, if property is transferred to another through your estate, the recipient can use the value of the property at that time in measuring any gain on the sale of the property. Consequently, choosing the right property to achieve your goals is an important aspect of any gift-giving program.

Another way to further the financial security of others without incurring gift tax is by payment of medical and educational expenses. You can pay an unlimited amount for these expenses tax free as ling as the payments are made directly to the medical services provider or educational institution. The person you benefit does not need to qualify as a dependent for tax purposes. Any medical expenses, however, must not be reimbursed by insurance, to either you or to the beneficiary.

If used properly, a program of gift-giving can benfit everyone involved. If you have any questions about the best way of using gifts as past of your overall financial plan, please do not hesitate to call us.

Sincerely yours,

R. Carter Runyan, CPA         Bryan A. Jackson, CPA

Jackson and Runyan, Certified Public Accountants, PLLC

Please feel free to contact either Bryan Jackson or Carter Runyan.