For those who want to take advantage of the current historically high gift and estate tax exemption amount, time is quickly running out to do so. The reason is that the exemption amount is set to change in 2013, unless Congress acts otherwise. Because of the situation, some folks are already acting to take advantage of the deal, and still others are considering whether they should act swiftly to do so before the year's end.
At present, tax law allows individuals to give up to $13,000 per year to an individual without incurring any gift taxes or reducing one's lifetime exemption amount. The exemption amount itself is $5.12 million. Unless Congress acts otherwise, the lifetime exemption amount is set to fall back to $1 million in 2013, drastically reducing the ability of people to achieve tax savings.
Estate planning attorneys are expected something of a last minute rush by folks wanting to take advantage of gifting plans so as to make use of the exemption. Time is quickly running out to do so, though, and those who are on the fence need to act quickly.
In determining a course of action to take, it should be kept in mind that the intelligent use of trusts is a great tool for gifting. Trusts are versatile tools and can be tweaked according to the goals of each individual estate plan.
Another thing to keep in mind is that one should try to be forward thinking with respect to which assets are gifted. Gifting assets that are expected to greatly appreciate is a good way to remove assets from one's own estate, but also for the recipient to avoid capital gains tax down the road if they choose to sell the assets.
Because it isn't clear what lawmakers will do with respect to the exemption amount, it is better to be prepared and to decide early what one will do. For some people, now is not the time to make gifts. For others, gifting can work well for their plan, and now is a great time to act on the current exemption amount.
Source: Reuters, "Get ahead of the coming gift-tax-apalooza," Chris Taylor, June 8, 2012.