The question asks if $1million transfer today or delayed and transferred as a bequest in five years, is there any advantage in delaying by five years? Transfer today is subject to 30%tax rate, the recipient is subject to marginal tax rate of 25%. The answer says 2% more wealth will be created in five years than if portfolio had remained in the estate. The answer also says there is no advantage in delaying payment of the gift. It got me confused. If more wealth is going to be created, isn’t this a good thing?
What this says is that if transferred now you can gain 2% in reinvested tax savings. So you are 2% better off to transfer now than wait 5 years.
Thank you, fully understand now.