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Short-lived Gifting Opportunity? Why it might be time to get out the estate plan
Posted in Estate Planning

Congress unexpectedly passed a law that significantly increased the ability of the affluent to transfer wealth to loved ones, effective Dec. 17, 2010. Prior to the law, a person could give up to $1 million during life (in addition to the ability to make annual gifts of up to $13,000 that do not count toward the lifetime limit). For a married couple, $2 million could be gifted during life (in addition to $26,000 annually).

The new law, however, permits individuals to gift $5 million during lifetime, and the amount is indexed for inflation ($5.12 million for 2012). Married couples get twice this amount. Lifetime giving to children is generally preferred to transfers at death, because the appreciation on the lifetime gifts will be removed from the estate tax (slated to be at a federal rate of up to 55 percent beginning in 2013). While the new law was an unexpected surprise to many estate and gift tax professionals, the amount any one person can gift during life is scheduled to revert to $1 million per person on Jan. 1, 2013.

Tax professionals have had many discussions with clients about the 2-year window to make gifts. Given the current state of the economy, and that the law is slated to remain in effect through 2012, many people have tabled the idea until 2012. Recent purported discussions in Congress, however, could short-circuit this enhanced gifting ability. The latest buzz out of Washington indicates that the Super Committee is considering once again limiting the lifetime giving ability to $1 million, with a potential effective date of Nov. 23, 2011. Regardless of whether or not the new law passes that soon, many should seriously consider this likely limited window to make gifts to loved ones, recognizing that what Congress gaveth on Dec. 17, 2010, Congress can taketh away tomorrow.

If you have questions about lifetime giving or other estate planning options, please contact a member of the Estate Planning Practice Group of Bingham Greenebaum Doll.

To learn more about Greg J. Duncan and his practice, visit his profile.

  • Partner

    Greg works with estate and wealth transfer and matrimonial law in the firm's Estate Planning Department and is also part of the Corporate Services Department. Among the legal services he provides for his clients are estate and gift ...

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