Please reply to the below discussion in 2 paragraphs. In the first, clearly state with which parts of the other student’s thread you agree or disagree. You must provide an explanation for why you agree or disagree with the other student’s thread. In the second, add some additional comments of your own that add to the discussion.  the reply must be at least 250 words.

Having a wealth transfer plan is important no matter the level of wealth a client has accumulated. There are many effective strategies that can be utilized and determining the right combination of such should be a top priority. Therefore, the first question that should be asked is the overall objectives that the client has for their wealth transfer plan. According to Spilker et al. (2021), “Wealth planning coordinates both income and transfer tax strategies with nontax objectives” (p. 25-30). Knowing the nontax objectives of the client will allow the estate planner to offer several alternatives, each of which could pose significantly different tax consequences.

            One wealth transfer plan strategy that can be employed is that of serial gifts. This strategy utilizes the annual gift tax exclusion to transfer wealth over a period of years. The only caveat to this exclusion is that the property transferred must qualify as a present interest. In other words, there must be a current economic benefit to the recipient. The annual exclusion is currently $15,000 per recipient. In addition, a married couple can each contribute up to $15,000 (effectively doubling the exclusion). As an example, suppose a married couple has four married children, and three grandchildren. This couple could gift $120,000 to their children, $120,000 to their children’s spouses, and $90,000 to their grandchildren. This would reduce the couple’s overall wealth by $330,000 per year without ever having to apply this money against their lifetime exemption limit of $11,580,000 each. For couples with very large estates, this strategy could transfer significant amounts of wealth as long as it is employed over multiple years.

            The use of serial gifts does bring up other concerns that should be addressed before implementing this strategy. Perhaps an important question to ask would be about any concerns the client may have regarding their heirs receiving present interest in these kinds of gifts. There are some potential drawbacks. Chatzky (2020), explains the importance of setting expectations: “It helps that you be clear and careful about your intentions when you begin a pattern of gifting, especially when giving large sums to older or adult children. Recipients can very quickly come to both expect and, in some cases, depend on these gifts” (paras. 9-10). Additionally, if a client has concerns that a recipient may use the resources for undesirable or illegal activities (addictions, etc.), serial gifting may not be the best option. If serial gifting is not the best option for a particular recipient, it might be appropriate for the client to investigate potentially paying the medical and/or educational expenses of that recipient, as these types of payments are not considered gifts and are not subject to exclusions or limitations. The above scenarios for the annual gift tax exclusion could prove helpful in reducing overall wealth to under the $11,580,000 lifetime exemption limit per person, if necessary.

For any client, regardless of the size of their estate, there may be a nontax incentive to use serial gifting – simply, the satisfaction of enhancing the lives of others and being around to see the benefits of such generosity. If gifting to your heirs (and others) during your lifetime does not cause an undo strain on your own lifestyle, then this type of behavior should be encouraged. In Proverbs, we are instructed, “do not withhold good from those to whom it is due, when it is in your power to do it” (English Standard Version Bible, 2001, Proverbs 3:27). And of course, we know from the writings of Luke that “it is more blessed to give than to receive” (English Standard Version Bible, 2001, Acts 20:35). For these reasons, and many others, a client should be encouraged to incorporate serial gifting into any wealth transfer strategy to the extent that it fulfills their tax and nontax objectives.