Cash Hash » Cash Hash » Free Cash » Estate freezing/ why its beneficial to gift shares to another family member?

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: Why is it beneficial to gift shares to another family member, say my son, than just having my son buy the shares himself?
I mean shares of a corporation

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  #2 ()
: It can be very beneficial to you, if you have a large estate that might exceed the limit at which estate taxes kick in, and you are giving stocks that have appreciated a great deal since you bought them. You can give away a VERY large sum of money, far larger than if you are giving cash.

For example, for 2013, the yearly limit for a tax-free gift to any individual is $14,000. Now, let's say you purchased 500 shares of stock years ago for $7 a share, and it's done very, very well and is now worth $100,000. You could gift those shares to your son, at your original cost basis of $3,500 plus the cost of commissions to buy them, and have a good 10k left to gift for that year.

Now, your son will someday have to pay capital gains tax when he sells, and he will have to pay ongoing taxes each year on any dividends. That's something to consider. If your estate is expected to not trigger an estate tax when you're gone, this wouldn't be a good idea. Better would be to bequeath those shares to your son. His cost basis will be not what you paid when you bought, but what the closing price was on the day of your death. The cost basis is 'stepped up'. That would greatly benefit him. He could immediately sell those shares and owe no capital gains.

It's a good question, and one you should ask your financial planner, If you don't have an estate plan now, do it.
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