The $5 Million Gift-Tax Exemption: Going, Going, Gone


If you are planning to make significant gifts in the near future, you had better get going. The current lifetime gift-tax exemption, which is currently set at $5.12 million ($10.24 million for couples) is set to expire at year-end. Absent action by Congress, beginning on January 1, 2013, the estate and gift-tax exemption amounts will revert back to $1 million per person ($2 million per married couple) and the tax rates will be substantially increased. That means in 2013, any gifts over $1 million will be subject to tax at a top rate of 55%.

Although commentators believe that Congress will take action to prevent such a dramatic shift in the exemption amounts and tax rates, it is unclear what the gift and estate tax landscape will look like in 2013 and beyond. Accordingly, an important tax planning opportunity for certain individuals may be closing at year-end. Since year-end is fast approaching and gifting may require significant planning, any individual interested in making gifts in 2012 should contact their attorneys and accountants as soon as possible.

Even if gifting this year is not of concern, there is also speculation that Congress may restrict or eliminate certain advanced estate planning techniques such as sales to intentionally defective grantor trusts and family limited partnerships in the near future. Accordingly, there may also be limited time to take advantage of these planning opportunities, which can provide for management succession and a tax-efficient transfer of wealth from one generation to the next.

Should you have any estate planning concerns, please do not hesitate contact a member of the Allen Matkins Tax Department.

William Ahern

William R. Ahern
Tax & Joint Venture
Orange County
(949) 851-5468
(949) 553-8354 (fax)

E-mail me

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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