I don’t understand why this is so: for gifted money where the donor pays the gift tax, the future value of the gift is
PV x (1 - Tg + Tg x Te )(1 + rg x (1 - tig))^n
where Tg = gift tax, Te = estate tax, rg = before tax investment return, tig = investment tax for the recipient.
I agree that paying the gift tax with money from the remaining estate reduces future estate tax by PV x Tg x Te, but that tax saving is not realized now, and it doesn’t affect the gift money the recipient receives, does it? Anyone who knows how to derive this formula? Thank ya!