Year-End Gift Planning for Procrastinators – The Gift-by-Promise Plan Works as Advertised

Dear Clients, Colleagues, and Friends,

Following the release of Monday’s Client Alert on “How to Give Away $5.12M in 26 Days” we were contacted by several of our readers who procrastinated and now find themselves wanting to do their year-end gift tax planning prior to December 31. I guess these folks have been in a coma for the past 23 months and just now awakening to find the gift tax laws are a changing… Not to worry — there is still time and we can help you! — thanks, in large part to our friend and tax lawyer extraordinaire: Austin Bramwell.

Even for the procrastinators among us, using the Gift-by-Promise Plan (Plan) should be considered. The strategy is simple: Instead of transferring cash or other property this year, an individual can promise to make gifts to the donee(s) in the future. If the promise is designed so that it is legally enforceable under local law but is not in exchange for consideration in money or money’s worth, it will be treated for federal gift tax purposes as a taxable gift when the promise is made (rather than when it is later paid) taking advantage of the $5.12M gift and estate tax exemption amount while it is still available.

In the Barron’s article we referenced in Monday’s Client Alert, the author reported Pennsylvania being the only state in which the Gift-byPromise Plan would work. According to Mr. Bramwell, the Plan will work no matter in which state the Donor resides, so long as the Donee(s) provide consideration to the Donor that will be legally sufficient to make the promise enforceable.

This week, Austin Bramwell released his long awaited article: “The Gift-by-Promise Plan Works as Advertised” wherein he carefully and thoughtfully debunks previous arguments against this Plan, and cogently takes the reader through the technical reasons why the Gift-by-Promise Plan is sound planning and should succeed if challenged by the IRS.

So, there is time for the procrastinators who haven’t yet gotten around to doing their gift tax planning. Below is the link to Mr. Bramwell’s excellent article for those insomniacs who enjoy reading technical tax materials: Gift by Promise Works as Advertised

No more excuses. If you still haven’t performed your end of year gift tax planning, the Gift-by-Promise Plan may be the ideal approach for you.

Jeffrey M. Verdon, Esq.


Posted in Client Alert.