With the government's $5.12 million gift-tax exemption set to fall to $1 million at year-end, more families are using the current leeway to do some financial housekeeping, experts say.
The clock is winding down on the first half of 2012 - the “Year of Gifting.” With the nation’s capitol rather rancorously heading into election season, the time for “gifts” is closing. In fact, “gifts” were the subject of a recent article in The Wall Street Journal titled “A Golden Age of Gift Giving.”
With the historically generous $5.12 million gift-tax exemption set to expire on December 31, 2012, this may be the time to make gifts among your family so your family members are not burdened with estate taxes later on.
A $1 million estate-tax exemption and higher taxes in 2013 and beyond should be good incentive to take advantage of the once-in-a-lifetime gifting opportunity that is still available for another 6 months. However, waiting until the last moment to make a gift may not be advisable. There may be planning steps and appraisals that need to be obtained in order to maximize or support the gift. These take time.
If you have a business or own a farm, this opportunity can be especially important because assets and real estate can tend to creep up in value. If the value exceeds $1 million in assets or real estate then there is a possibility that business assets or farm ground will need to be liquidated to pay estate taxes at rates of up to 55%. Yet with a little planning, the parents can keep control of the business and still pass gifts of value on to heirs to minimize or eliminate the estate tax problem later.
Watch our short video of Business Succession Planning to find out more.
Reference: The Wall Street Journal (May 25, 2012) “A Golden Age of Gift Giving”