Don’t Let the 2012 Gifting Exclusion of $5 Million Pass You By…

The IRS is allowing individuals to make gifts of up to $5,120,000 in 2012 before having to pay any transfer taxes.  This exemption amount is returning to $1 Million in 2013 unless modified by Congress.  Given the current economic uncertainty and existing national deficit, this may prove to be one of the best times in history to shelter assets from gift and estate tax through lifetime gifting strategies.

Why Make Gifts Now ? 

There are a variety of potential benefits to implementing gifting strategies in 2012. We have included some considerations below

  • Reduce Estate Tax on Future Appreciation: If a 2012 gift of $5 million were to appreciate to $10 million through the date of the donor’s death, there is a potential to receive an estate tax savings of $2.75 million (55% of $5 million in appreciation). Should the estate exemption remain in 2013 and beyond at $1 million this could result in a total federal estate tax savings of close to $5 million ($9 million x 55%) not factoring the additional state benefits which would also be received.
  • Succession Planning for your Business: Consider gifting limited partnership interests or non-voting stock to avoid future income and estate taxes on the family business. Powerful valuation discounts are available on these gifts to further maximize potential tax savings. Transferring even small interests now can provide significant savings as your business grows.
  • Asset Protection: Gifting strategies and transferring assets to certain irrevocable trusts can not only preserve your wealth, but can also shelter assets from possible future claims, etc.
  • Other Gifting Vehicles to Consider: There are a variety of other vehicles that may fit your situation relative to gift and estate planning strategies. Some options include Grantor Retained Annuity Trusts (GRAT), Qualified Personal Residence Trusts (QPRT), or Family Limited Partnerships (FLPs).

If you have not updated your estate documents in several years, now may be a great opportunity to update your current plan for asset protection and wealth preservation. We can assist you with making informed decisions about the power of utilizing gifting techniques to preserve existing wealth and transfer to the next generation.

We would be happy to review your current situation and discuss these opportunities. Please contact our office for an appointment while there is still adequate time in 2012 to plan.