A common tax avoidance strategy is to make annual lifetime gifts in the maximum amount exempt from the gift tax in order to reduce or avoid the estate tax. These gifts are likely intended as an intergenerational transfer of wealth, only differing from passing through the estate in timing. The donors probably don't intend for their tax avoidance strategy to affect the ultimate equitable distribution of their wealth. However, under the Uniform Probate Code (UPC) and case law applying it, these gifts are generally not treated as advancements, so an uneven distribution can result from something as simple as differing ages of descendants resulting in a different number of annual lifetime gifts. This article proposes to update and modernize the UPC by presuming that gifts in the exact amount of the annual gift tax exemption are advancements, thus bringing the distributive effect of these transfers in line with decedents' probable intent. President Biden has proposed taxing thousands more estates, so the time to make this change is now.
Elder, Jackie and Vars, Frederick E.
"The Ultimate Gift Horse: Modernizing the UPC on Advancements to Avoid Unintended Redistributions,"
ACTEC Law Journal: Vol. 47:
1, Article 6.
Available at: https://scholarlycommons.law.hofstra.edu/acteclj/vol47/iss1/6