An enormous opportunity for families to reduce their estate taxes – and in some cases, save millions of dollars – will end on December 31, 2012. If there’s a chance you can take advantage of these savings, it’s wise to act immediately, because unless Congress changes the law, the window of opportunity will close permanently when the ball drops on New Year’s Eve.
Between now and the end of the year, the lifetime exemption from the federal gift tax is $5.12 million. But on January 1, 2013, this exemption is scheduled to be reduced drastically, to just $1 million.
The gift tax applies anytime you make a gift to someone other than a spouse or a charity. In general, you can give any person (or a trust) up to $13,000 a year without there being a gift tax. But if you give someone more than $13,000 in a calendar year, then the tax applies to the excess.
However, you also have a “lifetime exemption.” Over the course of your lifetime, you can make gifts over the $13,000 annual threshold up to the amount of this exemption without paying tax. [Read more…]