Time Is Running Out As Gift Tax Deadline Looms
By Steve Barlotta, CPA
If you’re contemplating making sizeable gifts of your assets, now would be the time to get the ball rolling. That’s because the current federal tax exemption on estates and gifts is set to revert back on Jan. 1, 2013, from $5.12 million to $1 million; the same level it was at in 2002, before tax cuts passed during the George W. Bush era went into effect. While the outcome of the upcoming presidential election may very well indicate whether the $5.12 million exemption will be extended, we don’t have a crystal ball to tell us exactly what’s going to happen. So, this might be the most opportune time to take advantage of the high gift exemption while it’s still in effect.
By making substantial gifts under the $5.12 million exemption, an individual can reduce the size of their estate and the potential tax hit at the time of their death. But, if you don’t start the process in the next few weeks there’s a possibility that the necessary paperwork won’t be completed before the end of the year.
I know we’ve been down this road before where the alarm bell has been sounded when estate and gift taxes were set to expire. And every time it seems that the President and Congress have come in at the eleventh hour to pass some type of stop-gap measure. But, in this highly charged political environment where neither party seems very interested in working together, the current $5.12 million exemption might be as good as it gets.
If you made the decision that 2012 is the year to act on gifting assets out of your estate, I would think now would be the time to start your planning. An estate is comprised of many different components that can take a considerable amount of time and attention. If your gifting plan includes real estate, appraisals will be needed. Because it’s the end of the year, an appraisal may very well take up to two months. So, it’s safe to say that if your gifting plan is not straight forward, waiting until December will be too late.
Image Source: AICPA.org
