Asset Transfer

A good retirement plan should not only provide enough retirement funds during your retirement, but also provide for your family if you pass away. You can make the arrangements early through simple security planning and there are even tax shelter effects. (note 1)

Not everyone needs to plan for estate tax shelters; this is only if you plan to leave assets of value much higher than the exclusion limit and the deductible amount under taxation laws. For the average middle-class family, there might not be a large estate so aggressive estate tax shelter planning is not necessary. But for families with high-value assets and/or high income, the problem of having to pay large amounts of estate tax at the time of inheritance may catch those unprepared off-guard and end up eating away one’s life savings (take the highest estate tax rate of 50%). If you foresee a large amount of estate tax to be paid, early asset transfer and estate planning are recommended.

Asset transfer is the easiest of all of the tax sheltering options, and everyone can make plans on his/her own. An “Asset Transfer Strategy" is transferring taxable income into non-taxable income. You can utilize the following two simple strategies to conduct asset transfer:

• Make use of the annual gifting tax-deductible allowance
  According to Notification Tai-Tsai-Sui-#09404587540 (note 2) announced by the Ministry of Finance December 14, 2005, for gifts made after January 1, 2006, the annual deductible allowance is NTD1.11 million. Thus, parents can utilize this allowance and divide the amount of the gift to their children to be given out yearly within the legally tax-free amount. However, please note that gifts made two years before death of the donor are still taxable; therefore, to fully utilize the allowance, planning must start early.
• Transfer assets to the spouse first then make use of the annual tax-deductible allowance of both you and your spouse
  lower income relative to the husband, the husband may want to transfer assets under his name to the wife, and then the couple can both make gifts to their children, doubling the tax-deductible allowance and accelerating asset transfer.

Note 1：
Tax shelter effects may differ according to different application of basic taxation laws and amendments to the taxation laws of the ROC.
Note 2：Where there are future amendments to taxation laws, the amendments shall supercede。

Assume Mr. Wang has two children, one 15 years of age and the other 21. If his total estate is over 16.5 million, he can make plans for estate tax shelter.