No, we are not referring to the Mayan calendar-end of the world hysteria! Instead, we are referring to the end of the “Tax Relief Unemployment Insurance Reauthorization Job Creation Act”, which dies on December 31, 2012. That law provides unprecedented gift tax, estate tax, and generation-skipping transfer tax exemption amounts of $5,000,000 per person. (Indexed for inflation so that it is $5,120,000 this year.) If Congress fails to act to extend this law, then these $5,000,000 exemption amounts will all be reduced to $1,000,000 by automatic operation of law on January 1, 2013. Will Congress act? Who knows?
We do now know President Obama’s proposed law to modify estate and gift tax provisions. He is proposing that the gift tax exemption be returned to a maximum amount of $1,000,000 and that the estate and GSTT be reduced to $3,500,000 and that the top tax rate on those estates be increased from 35% to 45%. Considering all available information, as careful planners, we believe that this unique window of opportunity for gifting likely will close on December 31, 2012.
One of the reasons this gifting opportunity is so important is that by gifting assets now, you not only remove their present value from your estate, but you also remove all future appreciation of those assets. By removing appreciating assets from your estate now, the impact of that gift can be doubled, tripled or more over time. This is why we are encouraging anyone who may potentially benefit from this unique planning opportunity to run, don’t walk, to an estate planning attorney of your choice. If that choice should be Cramer Law Center, we are ready and standing by to help explain your options.