Limited Time Offer

Hurry – Act Now – Limited Time Only – Save Big Money! This is the message from Congress on Federal gift taxes. Until the end of 2012, an individual may make gifts of up to $5,120,000 ($10,240,000 for a married couple), including prior taxable gifts, without paying any gift taxes. Gifts in excess of that amount are subject to gift tax at an all-time low rate of 35%. Efective January 1, 2013 the gift tax exemption returns to $1 million with a rate of 45% for gifts above that amount.

If you would like to reduce the size of your estate by making substantial gifts to children, grandchildren or others family members or friends, you have six months or so to complete the gifts. The gift exemption is ideal for hard to value assets such as real estate, art, personal property and business interests.

Be aware that if you intend to transfer such assets you need to allow plenty of lead time. These types of assets require independent “qualified” appraisals to be filed with the IRS, and these appraisals can take from one to three months (or longer) to complete.

In addition, you’ll want to consider the best way to make these gifts. Should the gifts be outright to the beneficiary, or should they be in trust? A gift in trust can protect the assets from the beneficiary’s creditors, a divorcing spouse or bad judgment by the beneficiary. The trust can name successor beneficiaries which could include grandchildren or other younger family members. You can also structure trusts to provide you with income for a period of years after the gift is made. This allows you to enjoy the proceeds from the asset while still removing the asset from your estate.

It is certainly possible that Congress will extend these limits into 2013 and beyond. It is just as possible that they might take no action and let these provisions expire, or take action and settle on some other exempt amount and tax rate. It is unlikely, however, that any action will be taken by Congress until after the November election, so that each party can assess the strength of its position and the possibility of passing their respective legislation. It’s also possible they’ll continue the policy of extending the tax law some months into 2013 to allow time for a compromise agreement.

It seems imprudent to wait on Congress to act and given the 11th hour nature of recent Congressional action, the time to act is NOW!