If you haven’t already structured your estate plan to take advantage of the federal gift tax exemption, you are nearly out of time. Currently, the federal exemption allows you to pass just over $5 million in assets as gifts to others without those gifts being subjected to estate taxes. However, when December 31, 2012 arrives, the gift tax exemption will vanish and will be replaced by a $1 million exemption on January 1, 2013, unless Congress passes a new tax law.
Without a new tax law, once 2013 arrives, any gifts you give in excess of the $1 million limit will be taxed at a 55% rate. This represents a significant increase in the potential tax burden your estate could face. For high net worth individuals, failing to take advantage of the $5 million window before it expires is a significant mistake.
However, the time to act is nearly gone. Even if you are in a position where you can benefit from the increased gift tax exemption, you should consult with an experienced and qualified estate planning attorney immediately. To properly take advantage of the exemption requires some time and planning, and with only a few months left in the year some people may already be out of luck.
Taking advantage of this exemption is very important, as the only chance of the exemption being extended or continued relies upon Congress to come together and reach an agreement about this issue which recent history indicates is no sure thing.
Latest posts by Timothy P. Murphy (see all)
- Can’t I Just Transfer My Assets to My Adult Child to Qualify for Medi-Cal? - August 19, 2019
- How Much is Too Much? - August 17, 2019
- The Importance of Communicating Your Plans - August 15, 2019