Year-End Financial Planning from the Denha Law Blog
Making a Gift with A Free Look Into 2013-The Disclaimer Gift Trust discusses a trust technique that is worthy of consideration for those folks who want to make a sort of reversible gift. In this gift and estate tax bonanza period that the government plans on taking away on January 1, 2013, I’m often asked how a gift can be made that can possibly be taken back. Ordinarily, one cannot make a gift, change their mind and then take it back…..until now. The Disclaimer Gift Trust is an irrevocable trust established by one spouse for the benefit of the other spouse and, possibly, descendants of the spouse. This trust allows a gift to be made to it for the benefit of the receiving spouse, and the receiving spouse can wait up to nine months before deciding whether to keep the gift or “disclaim” the gift.
The inherent flexibility in the Disclaimer Gift Trust allows one to peek into 2013 and determine what Congress comes up with relative to tax legislation. If the gift tax laws are extended in 2013 and the previous gift to the trust is not desired, then the receiving spouse can continue to keep the assets in trust by making a special gift tax election on a timely-filed gift tax return, and the trust assets can remain with the recipient spouse. On the other hand, if the gift tax laws are not extended in 2013 (i.e. they revert to only $1 million), then the receiving spouse can disclaim (or give up) the trust assets received, and they will instead pass to the grantor’s descendants in further trust thereby completing the gift. If you’re hesitant on making a gift then you should consider the Disclaimer Trust. This is a gift that you can certainly get back.
The Urgency For Loss Mitigation Results, written by Lance T. Denha, Esq., Of Counsel to this law firm and principal of the Law Offices of Lance Denha, PC in Coral Springs, Florida, provides urgency for those homeowners who are in the midst of modifying their mortgages either to lower the interest rate, convert from a variable rate to a fixed rate, extend the length of the loan, reduce the principal balance, or to obtain forgiveness on existing debt.
Why the urgency? The Mortgage Debt Relief Act of 2007 (“Act”) allows cancellation of indebtedness income to not be considered taxable income provided certain requirements are met. Put another way, if the requirements are met and a mortgage modification occurs before the end of 2012, then any forgiven debt will not be taxable. However, this tax reward will expire at the end of this year. It is imperative that any modification be completed before year end. If Congress fails to extend this Act, millions of homeowners who fail to complete this process will receive a nasty tax bill the following year.
Randall A. Denha, J.D,, LL.M., principal and founder of the law firm of Denha & Associates, PLLC with offices in Birmingham and West Bloomfield, Mich. www.denhalaw.com