If Congress adjourns shortly before the 2010 Christmas holidays without changing the current 35% gift tax rate for
2010-most likely the lowest rate any living Americans will ever see-estate planners will feel relatively safe telling clients to make large gifts to their children, even above the $13,000 per child annual exemption amount. (Under compromise legislation approved by the U.S. Senate and before the U.S. House of Representatives in December, the gift tax would stay at 35% through 2011 and 2012. The lifetime gift exemption would be raised from $1 million to $5 million-providing for a $10 million total exemption for married couples.)
Here's another advantage of gifting: It gives parents and the next generation or two the chance to talk openly about who should get what and why. When it comes to the will itself, it is easy for an estate advisor to admonish a family patriarch to communicate his intentions to all family members as a preventive measure against hurt feelings and contention upon his death.
Reality is always more complicated-especially when members of the next generation are worried about outliving their money.
"Long life expectancies can make children more litigious if they feel they haven't been treated fairly," says Rubenstein. "On the other hand, 90% of all probate contests are from dashed expectations."