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Now is the time to consider tax-saving strategies. One crucial area involves large non-charitable gifts and gift taxes. If you give more than $1 million in 2010, the maximum gift tax rate is 35 percent. Next year it will jump up to 55 percent. Basically, 20 cents more on the dollar will go to Uncle Sam.
There are other asset protection options that may expire at the end of the year. Right now, when you give a family member a fractional share in a vacation house, for example, the Internal Revenue Service recognizes certain discounts that would tax the gift at substantially less than fair market value. That part of the tax law may change after December 31st.
The tax law on Grantor-Retained Annuity Trusts and intra-family loans may change too.
Thoughtful planning may take time and money, but it can also yield an excellent return. Taking action now could save 25 percent of whatever amount you give over $1 million, compared to the effects after Dec. 31st, 2010.
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