YOUR TAX PLANNING CHECKLIST FOR YEAR END 2022 AND THE NEW YEAR 2023
Direct gifts of tuition and medical expenses These are not taxable gifts and no limit applies .
Inter-generational loans These can be made free of gift tax . Interest can be funded using the annual gift tax exclusion of $ 16,000 in 2022 and $ 17,000 in 2023 .
Trust and Partnerships
Qualified Personal Residence Trust This compresses the Gift Tax transfer valuation due to the carve-out of the right to reside in the property . The donor must survive the trust term to be effective . This is gift tax-efficient .
Grantor Retained Annuity Trust ( GRAT ) This is an option for those who want asset growth to pass to the next generation free of gift / estate tax . The donor transfers assets that are likely to appreciate to a GRAT , but retains an annuity from the assets . The appreciation of the assets while in the Trust goes to the donor ’ s heirs after the Trust term , free of Gift / Estate Tax . This is gift tax-efficient .
Charitable Remainder Trust ( Split Interest ) Charitable Remainder Trusts ( CRTs ) are effective vehicles for recognizing gains on appreciated assets tax-efficiently . CRTs defer capital gains tax over the Trust term , create an annuity for the donor from Trust assets and allow an up-front tax deduction for the remainder interest going to charity .
Charitable Lead Trust ( Split Interest ) This allows a charity to receive an annuity from the Trust during the Trust term . The growth in the Trust assets during the life of the Trust can pass to heirs / beneficiaries free of gift tax .
Family Limited Partnership ( FLP ) For those who wish to transfer business assets to the next generation , FLPs allow a discounted transfer value for Gift tax purposes , while still retaining substantial operating control for the donor .
Irrevocable Life Insurance Trust Life insurance proceeds add to the insured ’ s estate ( and estate tax ) if owned directly by the decedent . Life insurance contracts should instead be held by a Life Insurance Trust with the insured ’ s family as beneficiary .