Prudential Financial Outlines Practical Investment Tips You Should Consider in the Retirement Red Zone^R

NEWARK, N.J.--(BUSINESS WIRE)--Whether it’s taking stock of all your potential income sources, making sure you don’t miss out on maximum Social Security benefits or figuring out how to fund post-retirement health-care coverage, there are a number of critical investment decisions Americans in The Retirement Red Zone—the five years before and after retirement—should make.

Prudential Financial can help with those decisions. Its retirement experts have developed 12 practical tips to help you manage financial risks so you don’t see, well, red, in The Retirement Red Zone. This week’s tip marks the twelfth and last in this series.

Tip No. 12: Consider gift and wealth transfer opportunities.

For individuals looking to minimize their taxes and maximize their gifts to their heirs or loved ones, lifetime wealth transfer planning may be the answer. “Lifetime wealth transfer is, in essence, the strategic transfer of assets to selected beneficiaries—presumably children, grandchildren and/or charities—in a manner that reduces or eliminates transfer taxes, such as gift, generation-skipping and estate taxes,” says Robert Fishbein, a vice president and corporate counsel in Prudential Financial’s Tax Department.

The simplest and most efficient form of wealth transfer to heirs is the $12,000 per donee annual exclusion, which enables a donor to make a gift of $12,000 to an individual each year without triggering any transfer tax. “This is a powerful wealth transfer tool,” Fishbein points out. “Say an individual makes the maximum $12,000 gift to three children for 10 years. By doing so, he will have removed $360,000 from his estate, and the resulting estate tax savings equal approximately $150,000, assuming the $360,000 would be fully taxable.”

An individual can also make unlimited gifts for the medical care or education of a beneficiary, as long as that payment is made directly to the health-care provider or the educational institution. Moreover, under a recent IRS ruling, an individual can pre-pay education costs. So a grandparent could, for example, pay $100,000 to cover four years of private school education for a grandchild without any gift, generation-skipping or estate tax consequences. That amount—or any amount paid directly to a school for such education—would be entirely ignored for wealth transfer tax purposes.

Another common lifetime wealth transfer option is to have life insurance held by a trust. “By coupling trust-owned life insurance with tax efficient gifts, an individual can remove wealth from his estate while living in the form of gifts to the trust to pay premium, as well as keep life insurance proceeds out of his taxable estate,” Fishbein explains.

Even making taxable gifts while living is preferable to paying estate tax on the same amount, because the gift tax is imposed on a tax exclusive basis and the estate tax is on a tax inclusive basis. “By making the gift, all future growth on the asset will not be included in the donor’s estate, making this technique even more powerful,” says Fishbein. “While it may be difficult to convince an individual to pay any tax before absolutely required, the economics here prove the benefit of making gifts and paying lower taxes as a result.”

For more information on this series, visit Prudential’s Online Newsroom at www.news.prudential.com.

Prudential Financial, Inc. (NYSE: PRU), a financial services leader with approximately $631 billion of assets under management as of March 31, 2008, has operations in the United States, Asia, Europe, and Latin America. Leveraging its heritage of life insurance and asset management expertise, Prudential is focused on helping more than 50 million individual and institutional customers grow and protect their wealth. The company’s well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. Prudential's businesses offer a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management, and real estate services. For more information, please visit www.prudential.com.

Please consult with your tax and legal advisors regarding your personal circumstances.

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