Our regular readers, and anybody that has been paying attention to the current state of the estate planning, know that big changes are in store for 2013 when it comes to estate tax. The long and short of it is that, come January, the current estate tax exemption of $5 million-technically $5.12 million when indexed for inflation-will decrease to $1 million.
The exemption amount allows taxpayers to give away up to $5.12 million of the assets without any estate tax consequences. While most people haven't taken advantage of the favorable estate and gift tax law this year, there may still be time to do so.
Gifting is an important part of estate planning for many people. But gifts don't have to be given all at once, at the end of one's life or in one's will. Lifetime gifting can be an important strategy in many estate plans.
There are many options with lifetime gifting. They can be placed in trusts, LLCs, and insurance. Each of these techniques has its own benefits, and each allows for further tax savings.
Depending on the outcome of the election, the estate tax could be repealed or could see a slight increase from the $1 million default decrease.
As for the rest of the year, there may still be time to take advantage of tax savings. Between now and December 31, one could give away $5.12 without gift or estate tax consequences. Couples can give twice that. It is a huge opportunity that is quickly passing away.
Source: Forbes, "Estate Planning Isn't Ghoulish And Can Save Millions This Year," Robert W. Wood, October 30, 2012