Thursday, November 15, 2012

Post Presidential Election, Tax Professionals Predict Expiration of Lifetime Gift & Estate Tax Exemption

Now that the dust has settled following the 2012 presidential election, some tax experts are predicting that President Barack Obama's administration and the new Congress may let the current lifetime gift and estate tax exemption expire.  In his article, Grab the $5M Gift and Estate Tax Perk: It's Gone in 2013, Robert W. Wood discusses this important issue:

It’s post-election, nearly year-end, and taxes are on everyone’s mind. You may not be able to do much about the fiscal cliff or other imponderables. But you can fix your will and trust or just make a gift by year-end.
Act now! Think infomercial. This is a special limited time offer! Procrastination is understandable, especially about taxes and mortality. Yet it’s still surprising most people haven’t taken advantage of the incredibly favorable estate and gift tax law expiring in 2012. See It Pays To Plan For Future Estate Tax Changes

Congress enacted a $5 million exemption for both gift and estate taxes, but only through 2012. See Making Tax Decisions In Limbo. But wait, there’s more! Indexed for inflation, the exemption is now $5,120,000. It drops to only $1 million January 1, 2013. That’s a free pass to give away up to $5,120,000 without tax. If you are married, that’s up to $10,240,000 for a married couple with no tax.

Such an oppurtunity may never come again. Lifetime gifts of appreciating property can allow even more appreciation to escape estate tax. You can even impose conditions and controls so gifts aren’t squandered. Trusts, LLCs, and insurance can increase the amount escaping tax yet allow you to retain control. That way recipients don’t have unfettered access to the assets.
Even if you have never done estate planning, this year is a good time to start. Recall that in 2001, Congress increased the estate tax exemption in measured steps until December 31, 2009. Everyone assumed there would be comprehensive reform, but Congress failed to act. With superb timing more than a few billionaires died in 2010 when there was no estate tax. See Ghoulish Estate Planning Before New Year’s?
The only certainty is that the rest of 2012 is a bargain, and you don’t have to die to take advantage of it. Post-election, the estate tax remains a political football. Hopeful Mitt Romney had called for death tax repeal. President Obama proposed a 45% rate with a $3.5 million exemption. See Death Tax Resurrection.
But one thing is as certain as death and taxes. Between now and December 31, 2012, every couple with say $2M or more of assets should consider this before it’s too late.
 Photo credit: Microsoft

No comments:

Post a Comment