Generation Skipping Transfer Tax Notice for 2010

By Hoffman & Associates

Many of our clients gift life insurance premiums to their life insurance trusts on an annual basis. Prior to passage of the 2010 Tax Relief Act, there was uncertainty and risk around these gifts with regard to allocation of generation skipping transfer tax exemption. As a result, our advice to clients was to treat the money given to the life insurance trust in 2010 as a loan. However, with the passage of the 2010 Tax Relief Act on December 17, 2010, it now appears that you can allocate generation skipping transfer tax exemption to gifts to pay premiums made to life insurance trusts. Therefore, as of this week, we do not recommend clients treat the money as loans to the life insurance trust. Instead, we recommend treating those transfers as gifts as usual and applying the generation skipping transfer tax exemption on a timely filed 2010 Gift Tax Return, which must be filed no later than September 17, 2011. This negates the necessity of all the paperwork associated with documenting a loan, such as the promissory note.

For more information regarding this or any tax matter, please contact us at info@hoffmanestatelaw.com or 404-255-7400.