Maximizing Your Gift Tax Benefits Before the Window of Opportunity Closes

Estate Planning Alert

November 16, 2012
Estate Planning Alert

Many of our clients have been asking us for information regarding the impact President Obama’s re-election will have on their estate tax planning options. There are steps you can take now to maximize your tax savings.

Gift Tax – The Window of Opportunity

A significant opportunity to capture tax savings currently exists, as the present $5.12 million federal gifting and estate tax exemptions will drop to $1 million on January 1, 2013. Additionally, the federal estate tax rate, which is now only 35 percent, is set to increase to 55 percent on January 1, 2013. These factors combine to create an opportunity that may never exist again in our lifetime.

Furthermore, if President Obama’s suggested February 2012 budget takes effect, several restrictive measures will limit estate planning as we currently know it.

Will Congress Take Action?

Hopefully, there will be a political compromise between now and year-end. However, many experts who have significant political/legal observation histories feel that this will probably not be sorted out until 2013, with the compromise to be retroactive to January 1, 2013.

The Republican House of Representatives may be able to resist having some of the new restrictive estate tax provisions enacted. However, since many wealthy individuals have used some or all of their federal $5.12 million gifting exemption in 2011 and 2012, or are finalizing their plans to do so by December 31, 2012, we may not see significant resistance to allowing the gift tax exemption to fall to $1 million. This makes it even more imperative to review options and act in the next seven (7) weeks for gifting strategies of $1 million or more in 2012.

What Can You Do in 2012?

Please discuss the possibility of implementing one or more of these strategies with a member of Hinshaw’s Estate Planning Practice Group. These are substantial opportunities that should be seized upon. We look forward to assisting you in determining the best options for capturing these potential tax savings.

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