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Gift Tax Opportunity…For a Limited Time Only!

This is not a sales advertisement. There are no echoing voices, special interest rates, nor any free no-name flat screen TV’s – but the ability to gift up to $5 Million is truly (probably) a limited opportunity.

The changes to the Federal estate and gift tax that were passed in late December, 2010, re-unified the estate tax and gift tax exemption amounts at $5 Million through the end of 2012. In 2013, the estate and gift tax exemption amount will return to $1 Million unless Congress changes the exemption prior to December 31, 2012. We have heard recent rumors that the Joint Select Committee on Deficit Reduction of Congress (the so-called “Super Committee”) may have suggestions for reducing the gift tax exemption from its current $5 Million level. This could happen before the end of the year in theory. If so, the change would be one year earlier than expected.

So what we thought was a limited opportunity to make lifetime gifts in excess of $1 Million may really be shorter than even originally expected.

But Why Should I Give Assets Away During Life?

Transferring assets with a lifetime gift is more favorable from a net tax perspective than relying upon transfers occurring upon death. This is because gift tax is calculated on the net value of the assets transferred (exclusive of the gift tax paid) while the estate tax is calculated by including all assets transferred including the money that will be used to pay the tax (tax inclusive). The uncertainty of the current exemption amount ($5 Million) and its duration makes today a unique opportunity that may not last.


Please consult with an experienced attorney for advice on how to make completed gifts to family members or friends within the confines of a trust in order to prevent unrestricted use of the gifted assets. There are also tax implications of the gift, such as the requirement of filing a gift tax return, that should be discussed with an attorney or CPA. When a lifetime gift amount is accompanied by other advanced estate planning techniques that our attorneys can assist you with, it is possible to greatly reduce or eliminate estate tax upon your death.

 - Attorney Jason Walker