The $5 million federal gift and estate exemptions will only remain in effect until the last day of 2012. Normally the gift tax exemption is only $1 million dollars. This means that, for a limited time, high net worth individuals can make gifts of up to $5 million without paying federal taxes on the amount. A married couple may gift up to $10 million. These exemptions were part of the temporary deal President Obama made with Republican leaders to extend the Bush Tax Cuts in the form of the 2010 Tax Relief Act. If the Democrats maintain control of the White House in the 2012 election, this exemption will almost certainly be slashed. Gambling on the outcome of a contested Presidential election does not fall into the realm of smart tax-planning for you and your family’s future. Infrequently has there been such a need for sophisticated tax planning taking into account multi-generational considerations.
Owners of small businesses that generate over $1 million dollars a year should act now to make appropriate succession-planning arrangements that may not be available to you come January 1, 2013. Taxpayers that have not yet taken advantage of the increased exemptions are encouraged to do so either directly or through a trust, LLC or other legal entity. Taxpayers that maximized their exemptions in 2011 are now able to gift another $120,000 ($240,000 for a married couple) during 2012 sans gift tax.