Q:

How can I maximize (i.e., leverage) my gift?

A:

Well, there are many ways to maximize a gift. If I give away a whole asset, I’ve given away that entire asset at its fair market value. If I break that asset into pieces and retain some, and I give away fractions, I [fractionalize 00:00:21] the asset and the tax court has agreed and the IRS acquiesces that that fraction is worth less than the actual fraction itself. So, if I broke something into four pieces and each was 25% and it was worth $1,000, each one would not be worth $250, but having all of them together would be worth $1,000. The 1/4 interest is worth something less because it’s been fractionalized. It’s not the entire. It doesn’t control the whole asset, and thus, according to the tax court, it’s worth less than $250. That’s how I maximize making gifts.

Note: The Tax Cut and Jobs Act of 2017 signed into law in December 2017 increased the exemption amounts mentioned in these videos. The personal estate, gift, and generation-skipping tax lifetime exemption was increased to $11.18 million per person. The annual gift tax exclusion was increased to $15,000 per donee per year.

Both amounts are indexed for inflation and may increase year over year until December 31, 2025, when the law sunsets and reverts to 2017 values