Gift Tax Opportunity Expiring at the End of 2012 and 2012 Inflation Adjustments for Items Affecting Estate Planning


Gift Tax Opportunity Expiring at the End of 2012

A significant gift tax planning opportunity exists for the next 14 months. The amount you may give away free of gift tax remains historically high and the rate charged if you must pay gift tax remains historically low through the end of 2012.

The amount you may give away free of gift tax (the "gift tax exemption amount") will be $5,000,000 for the remainder of 2011 and, as noted below, $5,120,000 for 2012. The maximum gift tax rate charged on gifts over the gift tax exemption amount will be 35% for 2011 and 2012.

Beginning on January 1, 2013, however, current law provides that the gift tax exemption amount will be decreased to $1,000,000, and the maximum gift tax rate will be increased to 55%.

The gift tax exemption amount is important for gift tax planning because a taxpayer can make cumulative lifetime taxable gifts up to the gift tax exemption amount without paying gift tax. With proper planning, substantial gifts may be made in 2011 and 2012 with noor relatively low gift tax compared to gifts made after 2012.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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