For those weighing what to do with the assets they have accumulated over a lifetime, the next few weeks may be time to make the final call. That’s because the current federal tax exemption on estates and gifts is set to roll back on Jan. 1 from $5.12 million to $1 million -- the same level it was at in 2002, before tax cuts passed during the George W. Bush era went into effect.
There are times to make your moves and then there are times to sit, think and await the proper time; which time is it for you? Well, if you have been following national politics and the impending fiscal (tax) cliff, then you know about the very definite deadline on estate planning opportunities expiring on December 31, 2012.
Don’t hold your breath that the White House and Congress will come to the rescue in the nick of time.
As a recent MarketWatch article sums it up, there’s “No playing chicken with estate tax deadline.” The present estate planning laws offer an unprecedented and generous gift tax exclusion. That is worth thinking about, too. The exclusion amount of the estate tax is tied to the gift tax amount and is therefore just as generous (but not many taxpayers are keen to qualify for that before year’s end).
Gifts, on the other hand, are easy to make. This especially is true as the holiday season is nearly upon us. With the current exclusion set to $5.12 million, you can give that much in your lifetime over and above the annual exclusion amount of some $13,000. Better yet, you can give this entire amount before December 31 if you so choose to secure the full exclusion amount. Why? Because the exclusion is automatically set to drop to $1 million unless the White House and Congress take action.
Reference: MarketWatch (October 2, 2012) “No playing chicken with estate tax deadline”