October 12, 2012
Gift Tax Savings Opportunities May Be Coming to an End on December 31, 2012
At the end of 2010, Congress enacted the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“2010 Tax Law”). The 2010 Tax Law made substantial and significant changes to the Federal estate, gift and generation-skipping transfer (GST) tax system. These changes are set to expire on December 31, 2012 unless Congress acts soon.
There are now unprecedented gift planning opportunities available, but they must be acted upon before the expiration of the current Tax Law in order to reap the benefits.
Currently, there is a $5.12 million exemption ($10.24 for a married couple) and a Federal estate, gift and GST tax rate of 35%. Unless Congress acts, on January 1, 2013 the exemption will be reduced to $1 million and the rate will increase to 55%.
Now is the time to take advantage of the higher gift exemption by making gifts before the end of 2012. Some of the many planning techniques available include:
- Sale of assets to Intentionally Defective Grantor Trusts (IDGTS)
- Spousal Limited Access Trusts (SLATS)
- Qualified Personal Residence Trusts (QPRTS)
- Forgiving a loan previously made to a family member
These gift planning techniques also take advantage of historic low interest rates and valuations and can also utilize valuation discounts on the assets being transferred thereby leveraging the gift being made.