Thanks to the 2010 tax-relief legislation, the rules for estate planning are very favorable in 2012. This two-year window of opportunity provides the incentive to act now. Lifetime gifts can be a simple, effective way to transfer your wealth to other individuals – provided you know the tax rules. Here’s a brief overview of three opportunities you may want to consider that allow you to make transfers without any estate or gift taxes.
Annual exclusion gifts. Did you know you can give up to $13,000 per year to as many people as you like? And you can gift to anyone, not just family members. If you are married, you and your spouse can give $26,000 per beneficiary per year.
Annual exclusion gifts are attractive because they’re simple – no tax reporting is required. They reduce your taxable estate (potentially saving a 35% tax), and there are no lifetime limits, as long as you stay within the annual limits. Gifts to individuals are not taxable income to the beneficiary and do not create any income tax deduction for you.
Lifetime exclusion gifts. With this type of gift, you can make gifts above $13,000 per person per year, without paying gift tax, up to a $5,000,000 lifetime limit (this amount is scheduled to change in 2013). Let’s say you give $100,000 to a family member. The first $13,000 is covered by the annual exclusion; the remaining $87,000 is applied to your lifetime exclusion. If this was your first gift exceeding annual exclusion limits, you would have $4,913,000 of lifetime exclusion remaining.
When making this type of larger gift, you should keep in mind that a gift tax return is required. You must report the gift, but will not owe gift tax. In effect, these lifetime transfers “use up” part of the exclusion that would otherwise be available at death to reduce your estate tax.
The key benefit is that if you transfer assets that appreciate in value, all of the future appreciation is removed from your taxable estate, although the recipient takes on your cost basis and holding period for income tax purposes.
Direct gifts (tuition and medical expenses). There are special rules in place for direct gifts of tuition or medical expenses. You can pay tuition or medical expenses for another person, without limitation. These gifts do not count against the annual exclusion or lifetime gift exclusion. However, you must pay the school or medical provider directly. Funds given to the beneficiary directly will not qualify. And “tuition” means just that – tuition only, not books, supplies, fees or room and board. No specific tax reporting is required, but as a rule you should keep good records. Ultimately, it is your responsibility to be able to prove that your gift qualified under this rule.
The information in this article reflects federal tax laws in effect for 2011 and 2012, after the enactment of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.
Wells Fargo Advisors does not render legal or tax advice. Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.
What’s in a name?
The mention of a Women’s Committee often conjures images of white-gloved, women of leisure who are socially active, gather over elegant lunches, speak in hushed tones, and carry on generations of tradition.
It is a little different at Washington National Opera. As the Women’s Committee of WNO celebrates its 37th year with an opening-night celebration for the company’s production of Werther on May 12, its 88 members remain energetic, vibrant, and forward thinking.
The leadership is a dynamic group of highly skilled professional women of all ages who continually search for ways to redefine this fierce group in ways that are most beneficial to WNO and really address the needs of the arts. They are friendly, outgoing, and welcoming. Each woman’s story is a little different. Some have been local residents for generations and have been Women’s Committee members for decades, while others are brand new to the community and have joined in the hope of making new friends. Some are opera experts who travel the world to see the latest artists and some will be attending this production of Werther as their first opera experience.
Over the years, the WNO Women’s Committee has helped promote WNO’s reputation for beautiful and exciting events that celebrate opera and its artists. Their work has helped raise the profile of the Opera as well as raise funds for the Opera’s bold artistic initiatives and community events.
This year’s opening night celebration for Werther is chaired by Melinda Keppler and Cindy “Cid” Szegedy. The event includes the opera performance followed by a reception and dancing with the artists on the Roof Terrace level of the Kennedy Center.
"I am honored to chair this event, and with a goal to support the amazing talent the WNO brings to Washington. It's also important to extend the Opera 'experience' to a younger audience and I'm hopeful that our event will do this." says opening night celebration chair, Cindy “Cid” Szegedy.
To learn more about the event, contact Cari Romeu at tel: 202.416.8305
In my last installment, I introduced some basic terms commonly used in the purchase and sale of stocks. Today, we will expand the list with a handful of more sophisticated, but equally important, terms. Hopefully this helps your understanding of the language of Wall Street, which can help you put together an informed investment strategy.
Capitalization: Total value of the various securities issued by a corporation, including preferred and common stock, bonds, debentures and other securities.
Debt-to-Equity Ratio: The ratio of debt to common shareholders' equity. This shows the extent to which the owners' equity is leveraged – or how much of it is borrowed funds based on investor speculation – which influences the corporation's ability to borrow further.
Hedging: Taking steps to minimize a potential loss. One hedging technique is selling short: selling borrowed stock in anticipation that the same number of shares will be repurchased later at a lower price. If the stock declines, the investor comes out on top. If, however, the stock rises, the investor may be required to repurchase the stock at the higher price, thus incurring a loss.
Margin: Securities can be bought on credit. Margin refers to the amount put up, or the amount borrowed, by an investor when using his or her brokerage firm's credit to buy securities. The percentage that can be borrowed on margin is regulated by the Federal Reserve Board. As an example, say it is currently 50% of the stock purchase price. A 50% margin requirement means that an investor must put up at least half the funds needed for a purchase. The amount borrowed is called the margin balance, and the brokerage firm charges interest on it. Margin borrowing is not suitable for all investors since it subjects the investor to additional risk.
Market Order: An order to buy or sell a stated amount of a security at the best available price as soon as possible. Most orders executed on an exchange are market orders.
Most Active List (Most Actives): A list of stocks that have the largest number of shares traded on a particular day. Heavy trading may be caused by an extraordinary event, such as a takeover or higher-than-anticipated earnings.
NASDAQ: The National Association of Securities Dealers Automated Quotation System is an automated information network that provides dealers and brokers with price quotations on securities traded over-the-counter (see below). Nasdaq quotes are published in the financial pages of most newspapers.
Over-the-Counter (OTC) Market: A securities market for securities dealers who may or may not be members of securities exchanges. The OTC market deals primarily in the stock of companies without enough shares or earnings to warrant a listing on an exchange.
However, in recent years, many companies that qualify for an exchange listing have chosen to remain with OTC trading. Some believe that the system of multiple trading by multiple dealers is preferable to the centralized trading approach of a major exchange, where all trading in a stock usually must go through the exchange's specialist for that stock.
Proxy: The authorization an investor gives a company official or another representative to vote in place of the investor at a shareholders' meeting. Most proxies pertain to the election of a board of directors and various resolutions submitted for shareholders' approval. Information about these proposed actions appears in a proxy statement.
Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.