Transferring Wealth

If you have an estate significantly over $5,340,000, you should consider gifting assets and paying the gift tax of 40%. The assets, the 40% tax, and any future asset appreciation are removed from your estate. This would be more beneficial than leaving the assets in your estate to be taxed at death since the effective estate tax rate would be 40% vs 28.57%(40/140) with a taxable gift since the gift tax is deductible from the estate. Greater after tax family wealth can be transferred using gifts as long as you can survive for 3 years after the gift. The IRS recognizes this benefit to gifting and so to discourage death bed transfers all gift taxes paid within 3 years of death have to be added back to the taxable estate.