25.[LO 4] Describe a reason why a generation-skipping tax was necessary to augment the estate and gift taxes?
26. [LO 4] Explain why an effective wealth transfer plan necessitates cooperation between lawyers, accountants, and investment advisors. An integrated team is essential to a successful wealth transfer plan because transfer and income taxes only represent one piece of the puzzle. Lawyers are critical to constructing property rights to achieve tax and nontax objectives while investment advisors provide the economic input necessary for long-term plans. Obviously accountants provide much of the necessary tax expertise. 27. [LO 4] Describe how to initiate the construction of a comprehensive and effective wealth plan. Wealth planning typically begins with understanding the individuals’ goals and objectives. These objectives include immediate goals, such as assuring a steady source of income, and longer term goals, such as providing for a specific division of assets or providing educational support for dependents. Most wealth plans will likely have significant tax and nontax consequences. When considering tax factors, however, an effective wealth transfer plan should also anticipate the economic and legal ramifications that will accompany any transfer of wealth. 28. [LO 4] List two questions you might pose to a client to find out whether a program of serial gifts would be an advantageous wealth transfer plan. The most obvious question would be whether the client could afford to make gifts given the level of income expected to be necessary to support the client in the future. Another important question involves the health/age of the client and the past and expected rate of appreciation for the proposed gift property. Serial giving is less beneficial for clients who might be expected to die soon and for property that has substantially appreciated in the past. 29. [LO 4] A client in good health wants to support the college education of her teenage grandchildren. The client holds various properties but proposes to make a gift of cash in the amount of the annual exclusion. Explain to the client why a direct gift of cash may not be advisable and what property might serve as a reasonable substitute.
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- Spring '12
- Taxes, Taxation in the United States, taxable gifts, unified credit