Be proactive with the anticipated reduction of the estate and gift tax exclusions.
When the clock strikes midnight on December 31, 2012, the “Bush Tax Cuts” are set to expire. Among the many provisions of the Internal Revenue Code (the “Code”) that will be impacted are the estate, gift and generation skipping transfer (GST) taxes. Of most importance is the anticipated reduction of the estate and gift tax exclusions from $5.120 million to $1 million and the increase in the maximum gift and estate tax rates from 35% to 55%. The GST tax exclusion will also decrease from $5.120 million to $1.40 million ($1 million adjusted for inflation) and the maximum tax rate will increase from 35% to 55%.
It is impossible to speculate what the estate tax exclusion will be in 2013 when taking into consideration the current political environment in Washington D.C. and the Federal government’s revenue needs. Thus, planning now to take advantage of the $5.120 million unified estate, gift and GST tax exclusion is more important than ever. It is important to discuss with your advisers potential gifting strategies before year end to remove assets from your gross estate. These strategies could include gifts to family partnerships, limited liability companies, irrevocable trusts or outright gifts to family members.
Important: To utilize the current unified estate, gift and GST tax exclusion make those gifts NOW and hire appraisers NOW!!! You should contact your advisers ASAP to discuss these strategies as attorneys and appraisers will surely be swamped in December and gifts must be made by December 31, 2012.