Many estate planning attorneys are expecting a last-minute rush on gift planning as the year draws to a close. That’s because there is a good deal of uncertainty at this point whether the opportunities for planning now will be present in 2013. As our readers may have heard, the lifetime combined gift and estate tax exemption of $5.12 is set to expire at the end of the year. Unless Congress acts, that exemption will go back to $1 million in 2013, drastically reducing opportunities for wealthy Americans to reduce their estate.
In addition to changes in the lifetime exemption amount, changes are also in store for the estate tax rate itself. In 2013, unless Congress acts, the top tax rate will rise from 35 percent to 55 percent, so that significantly more money will be taken out of estates.
It isn’t clear whether Congress will be acting on the issue, but many say it’s unlikely given that things have tended to move slowly in Washington in recent years and the fact that it’s an election year.
At present, individuals can give away as much as $13,000 per year per individual, without gift tax consequences and without using up the lifetime exemption amount. For wealthy families, that may help some, but it may not be enough. With the lowering of the lifetime exemption amount next year, wealthier individuals may want to consider some last minute gift planning.
Giving money and assets away should never be a quick decision. The best advice here is to get started well in advanced, to use trusts and other estate planning tools intelligently, and to look for opportunities to maximize tax minimization. One certainly shouldn’t count on any particular thing happening in Washington, since things can be unpredictable. Working with an estate planning attorney can help with some of the confusion greatly.
Source: Reuters, “Get ahead of the coming gift-tax-apalooza,” Chris Taylor, June 8, 2012.