2012 – The Year of the Gift Tax

2012 is a very special year for gift-giving.

Good News!

  • The current gift tax exclusion is the same as the estate tax exclusion – both of which are at historic highs.
  • The current gift tax credit effectively shields the highest amount of lifetime gifts in history:  $5,120,000
  • The current gift tax rate is the lowest in history:  35 percent
  • As a result of “portability” provisions enacted in 2010, following the death of a spouse in 2011 or 2012, a partially unused estate tax exemption can be used by the surviving spouse.  For example, if a married individual died in June 2011 with a taxable estate of $3 million, the $2 million unused exclusion amount could be used by the estate of the surviving spouse, or could be applied with respect to gifts.

Bad News!

All the beneficial features of current law noted above expire after December 31, 2012.  In 2013, the gift tax exemption reverts to $1 million, and highest gift and estate tax rates revert to 55 percent – a level last seen in 2001.

Take Advantage of the Current Opportunity to Lock in Savings

Gifts can be given directly, or through a family trust, and can be accomplished by outright transfers of property, or by other means, such as by forgiving family loans.  A Section 529 plan can be established to pay for education of children or grandchildren.  Gifts to family partnerships or LLCs can make use of valuation discounts to enhance the benefit of the gift tax exemption.

Call Now to Discuss Possible 2012 Gifts

Congress is unlikely to deal with the estate and gift tax or income tax rates before the November election, leaving legislative action to the lame duck Congress.  Taxpayers do not have the luxury of waiting until late December to begin strategizing about making significant gifts by year-end. Call us now to discuss your objectives, and formulate a plan that can be fully implemented before December 31, 2012.

Please contact Martini, Iosue & Akpovi by phone at (818) 789-1179 if you have questions or want more information.


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