Wealthy Americans who haven’t yet taken advantage of the $5.12 million gift tax exemption, your time is running short. Unless congress takes action before the end of the year, the exemption will go the way of the Dodo come 2013. Until then, however, parents can pass lifetime gifts to their children without fear of having to pay any taxes on the gift’s value.
At midnight on December 31st, 2012, the $5.12 million gift tax exemption will expire, and the traditional $1 million level will replace it. Though this change may not affect most families, the potential impact for wealthy families is rather significant. After December 31st, and gifts given above the $1 million level will likely be taxed at a 50 percent rate.
The expiring gift tax exemption may continue if congress is able to pass an extension. Estate planning experts have noted that this extension would have to come during an election year, and the prospect of it passing does not seem likely.
This year-end deadline also poses a significant hurdle to estate planning attorneys and their staffs. If you wish to take advantage of the gift tax exemption, you should contact your estate planning lawyer as soon as possible. If you wait too long, you may face a logjam caused by those who have put it off until the last minute. It’s always better to plan ahead and get it done before the year is up.