We are located at:
3 Executive Park Drive, Suite 107
Bedford, NH  03110

P.O. Box 10239
Bedford, NH  03110-0239

Phone (603)644-0275
Fax (603)606-4258

Gift Tax Planning Opportunity

With apples, mums and pumpkins now filling our farm stands, we are reminded that we are approaching the end of the two-year window in which individuals may make significant gifts without paying gift tax.  Unless Congress takes action before year-end, the lifetime gift tax exemption and generation skipping transfer tax exemption of $5,120,000 each are set to expire on December 31, 2012.  Both the lifetime gift tax exemption and the generation skipping transfer tax exemption are scheduled to decrease to $1,000,000 on January 1, 2013 (with some adjustments for inflation).  If you are considering making significant gifts to take advantage of these opportunities, it is important to begin the process soon.  Appraisals of the assets to be gifted may take some time to be completed, and the gift must be completed by the end of the year.

These increased exemption amounts are especially attractive to individuals who wish to transfer interests in closely held businesses or a vacation homes to members of younger generations.   Individuals who own vacation homes in Massachusetts, Maine, or other states that impose an estate tax on real estate owned by a non-resident decedent at death, even when there is no federal estate tax liability, may find this opportunity especially attractive.

Other ways to use the increased gift tax exemption include forgiving existing loans, creating irrevocable life insurance trusts and funding those trusts with cash that could be used to pay for premiums for many years into the future, and making gifts of interests in QTIP trusts.

Married couples whose marriages are not recognized under federal law may take this opportunity to equalize their estates by making lifetime gifts to each other, without incurring any gift tax.

People who take advantage of the increased lifetime gift tax exclusion realize the additional benefit of reducing their taxable estates at the time of their death, because all appreciation in the value of the gifted assets between the time of the gift and the time of death is removed as well.  (The downside of the lifetime transfer is that the gifted assets do not receive a step-up in basis at the time of the donor’s death.)

Add a Comment

(Enter the numbers shown in the above image)