Determine whether we make Bequest or gift

CFA Level III
#1

Quick question on this.

To determine whether we should make a gift or make a bequest do we need to calculate the relative value and assume whether if its above 1 that means its more optimal to provide a gift tax or if its below 1 which means its more optimal to provide an estate transfer? Will that be a good intuition? I used to assume that if the bequest had higher tax rate than we should simultaneously pick the gift tax, but I solved a question recently that was the contrary of that.

#2

The formula is FV of gift / FV of bequest

So if the answer is > 1 the gift is worth more than the bequest and it makes sense to gift.

If the answer is < 1 the gift is worth less.

Would you rather give more or less money? :slight_smile:

Don’t rely on just the tax rate. Do the math and see for yourself. They’re not long calculations.