At the end of that term, the beneficiaries receive the rest of the assets. The advantage for donors is that they still receive interim payments, while also receiving a discount on the value of the gifts to the beneficiaries. Because of how the trust is set up, it's exempt from the gift tax and any taxable gains on the sale. Finally, there's a fourth, more straightforward strategy for gift-giving that lacks a fancy name. Using this technique, wealthy taxpayers can take advantage of currently low interest rates to give cheap loans to family members.
Relatives can, in turn, invest that money in assets that generate higher returns, to reap a profit.
Another avenue of gift-giving to explore is the family limited partnerships. Partnerships let families create mini-investment clubs with cash, marketable securities or real estate. Parents can control the investments while allowing children the opportunity to participate in the investment as a passive limited partner. Parental gifts of limited partnership interests are generally valued on a discounted basis, thereby lowering the value of the gift. If an estate tax repeal goes into effect, Johnson says it's a good idea for wealthy taxpayers to double-check their wills.