Big Tax Savings to Expire in December
There is a short window of opportunity remaining to take advantage of significant estate and gift tax savings. Currently, the estate and lifetime gift tax exemptions are at record high levels of $5,120,000 per individual. This means an individual can make gifts during their lifetime or pass wealth after their death totaling $5,120,000 without incurring any estate or gift tax liability. This amount doubles for a married couple. Additionally, the federal estate and gift tax rate, for gifts in excess of that amount, is capped at 35% – the lowest rate in history.
Unless Congress enacts a new law, these limits will expire on December 31, 2012. Beginning January 1, 2013, the estate and lifetime gift tax exemption will plummet to $1,000,000 per individual, while the top federal estate and gift tax rate will jump to 55%. Therefore, the clock is ticking to take advantage of these historic tax savings.
Gifts of this magnitude may result in substantial tax savings for a family, but only if the gift is completed before the end of 2012. Transferring assets to an irrevocable trust or other entity, outright gifts or purchasing a life insurance policy are just a few of the ways to obtain tax benefits while directing the flow of income to your children or grandchildren.