Estate & Gift Tax Planning

The current landscape

The basis-vs-estate-tax tension

Transfer method	Recipient's basis
Lifetime gift	Carryover basis — no step-up
Transfer at death	Stepped-up (or down) to FMV at date of death

Consequence: for a client whose estate is comfortably below the exemption, gifting highly appreciated assets during life can be counterproductive — holding until death gives the heirs a stepped-up basis and no estate tax is due anyway.

Core gifting techniques

• Annual exclusion gifts — per donee, per year, requires a present interest; a Crummey power gives trust beneficiaries a temporary withdrawal right to convert a future interest into a present one
• Gift splitting — doubles the exclusion for married couples
• Direct payments of tuition and medical expenses — unlimited and excluded, but must go directly to the institution or provider
• GRAT — grantor retains an annuity; appreciation above the assumed rate passes to beneficiaries at little transfer tax cost
• ILIT — removes life insurance proceeds from the gross estate
• QPRT — transfers a residence at a discounted value while the grantor retains occupancy for a term

Portability and the marital deduction

The unlimited marital deduction defers estate tax on transfers to a U.S. citizen spouse. Portability allows a surviving spouse to use the deceased spouse's unused exclusion amount — but only if a timely estate tax return is filed making the election, even when no tax is otherwise due.