No. of Recommendations: 3
In doing estate planning, I’m looking at possibility of gifting low basis Berkshire shares to my son to remove from my estate—part of overall strategy to reduce my estate taxes.
A few comments and I will assume USA in this case.
You can only gift (without using some of your estate tax exclusion) up to $19,000 a year, and your spouse can gift another $19,000, and if your son is married, you can each gift another $19,000 to his spouse, for a total of $76,000 a year. That is about 160 B shares at current prices.
However, as you gift shares over the years, you lose the basis step up at death on those shares. While marginal capital gains tax rates are lower than marginal estate tax rates, they aren't that much lower.
What, realistically, is the chance/risk Berkshire holdings could result in a large, forced capital gain for us—years down the line post-Warren?
This is a very interesting question. A few years (decades?) ago, Microsoft suddenly declared a "special dividend" which caused many people to have a sudden big bump in taxable income that year. That could happen with Berkshire, but it isn't likely, I'd put the odds of that happening sometime in the next 15 years at 10-20%. In general, Berkshire likes to be as tax efficient as possible (much like Liberty), and if they decide to distribute some value directly to existing shareholders, they would attempt to do it in a tax efficient way (usually via a tax neutral spinoff of sorts).
Of course, post-Abel, who knows? Maybe Wall Street types will take over the company and wring every last current dollar out of it via various types of distributions with hardly a thought to tax efficiency. This ("bad management") is the biggest risk at ALL large companies. It's funny, but they never list that as a risk in their SEC filings, even though it is indeed the biggest risk of all.
my son has no intention or (hope) presumed need to sell before he then left shares to our granddaughters with basis step-up
Why bother giving the shares to your son in that case? Just give the shares directly to your granddaughter, and your son can use his own estate tax exemption for the remainder of his money. If you're worried about tuition grant/loan eligibility, if your level of wealth is high enough to be meaningfully affected by the estate tax, she won't be eligible anyway. Instead, gift her shares each year, and when tuition payments are required, make those payments directly (that isn't included in the annual gift limitation).
Or are you, unlike me, not stupid enough to live in Massachusetts and have no need
I don't see the problem. Just because you live in MA doesn't mean that you have to die in MA. Just move to FL a few years before you die as so many people regularly do.
