Gifting Can Be a Powerful Tool To Help Minimize Estate Taxes, says Atlantic Trust

Smart estate planning means more than just knowing who to name as a beneficiary

ATLANTA, May 22, 2014 /CNW/ - Making the most out of certain tax exemptions, like gifting, combined with taking steps to prevent costly oversights could prevent an estate from paying more tax than absolutely necessary, according to the professionals at Atlantic Trust, the U.S. private wealth management division of CIBC (NYSE: CM) (TSX: CM).

At death, an individual's estate is potentially subject to two federal taxes: Estate tax and Generation Skipping Tax (GST). These taxes have the potential to consume a huge portion of the inheritance intended for surviving family members. On top of that, many states impose a separate estate tax of their own.

"There are basic, smart steps that you can take to mitigate the impact of these taxes on your estate," says Paulina Mejia, managing director for Atlantic Trust.

One way is to take full advantage of the federal exemption amount—what each individual can give away at death without triggering estate tax—through careful estate planning with the help of a qualified professional, says Mejia. The federal exemption amount is currently set at $5.34 million.

Another way to minimize federal estate taxes is to make annual exclusion gifts, she says. Currently, individuals generally can give up to $14,000 per year to as many recipients as they like without incurring a gift tax. Married couples can combine their annual exclusion amount to give up to $28,000 per person  tax-free—a practice known as gift-splitting. These gifts do not count against the $5.34 million gift-tax exemption.

"Annual exclusion gifts are a simple but potentially powerful estate-planning tool," says Mejia.

For example, a couple with a combination of 10 children and grandchildren who gift-split can give away $280,000 per year ($28,000 per person times 10 people) using their annual exclusion. Assuming a growth rate of 6 per cent, that sum would be worth $10.9 million in 20 years, with all of the appreciation free of estate tax. At a tax rate of 40 per cent (the rate currently in effect), that represents a federal estate tax savings of more than $4.3 million.

For an overview of basic estate planning terms and strategies, read "Basic Estate and Gift Planning: The Most Important First Step." Atlantic Trust provides additional estate planning resources on its Online Resource Center.

The tax information contained herein is general and for informational purposes only. Atlantic Trust does not provide legal or tax advice, and the information contained herein should only be used in consultation with your legal, accounting and tax advisers. To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

About Atlantic Trust

Atlantic Trust is one of the nation's leading private wealth management firms, offering integrated wealth management for high-net-worth individuals, families, foundations and endowments. The firm considers clients' financial, trust, estate planning and philanthropic needs in developing customized asset allocation and investment management solutions. Experienced professionals deliver a broad range of solutions, including proprietary investment offerings and a robust open architecture platform of traditional and alternative managers. Atlantic Trust operates in 12 full-service locations throughout the U.S. with $24.0 billion in assets under management (as of December 31, 2013). For more information, visit www.atlantictrust.com.

About CIBC

CIBC is a leading Canadian-based global financial institution. Through our Retail and Business Banking, Wealth Management and Wholesale Banking businesses, CIBC provides a full range of financial products to individual, small business, commercial, corporate and institutional clients in Canada and around the world.

CIBC Wealth Management provides relationship-based advisory services and an extensive suite of leading investment solutions to meet the needs of personal, institutional and high-net-worth clients through an extensive distribution network, that includes CIBC Private Wealth Management, CIBC Wood Gundy and CIBC Investor's Edge. Our asset management, retail brokerage and private wealth management businesses combine to create an integrated offer, delivered through nearly 1,500 advisors across Canada. In addition, CIBC Asset Management provides global money manager services to institutional and high-net-worth clients and industry-leading retail investment solutions through our two mutual fund families - CIBC and Renaissance - and the CIBC family of managed portfolio solutions.

SOURCE: Atlantic Trust Private Wealth Management

Media inquiries: Caroline Van Hasselt, Director, CIBC External Communications and Media Relations, [phone], [email protected] or Carolyn Donnelly, Atlantic Trust Director of Marketing, [phone], [email protected].