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Government AffairsThe Grandchildren's TaxDid you know that if you want to give a gift to your grandchildren you could pay an 80% tax to do so! What if your grandchild has worked hard to get through college and needs a car to start his or her new job, and you want to help him purchase that car. You can only contribute $10,000 toward the purchase of that car and not have gifted him or her anything else that year; or else you may pay 80% more for the tax. You can only gift a maximum of $10,000 a year, in assets, cash or services to your grandchildren without incurring the grandchildren's tax. Is it fair that you spend years saving your assets, paying payroll, income and capital gains tax, and now when a family member needs help, you cannot do so without paying an additional tax on assets you have already paid taxes on before; at least twice before? This tax is designed to discourage you from passing on assets to your grandchildren, skipping the level of tax that would be paid by your children. The grandchildren's tax, referred to in the tax code as generation skipping tax, makes sure that assets get taxed again and again at each generation. How does that encourage people to save? The tax code provides for a $1 million lifetime exemption, but you need to plan your estate properly to take full advantage of this. Shouldn't a tax law encourage families to save assets and help each other? The generation skipping tax creates an incentive for families to spend their earnings or to give to strangers rather than encourage them to help their own family members. If you believe that this is bad tax policy please write, call or e-mail your legislator and tell him or her what you think. Your voice can make a difference! Patricia M. Soldano, President of Policy and Taxation Group ©1999 Newspaper Association of America. All rights reserved. |