Individuals currently have an opportunity to transfer meaningful
family wealth without incurring estate or gift tax. This
opportunity is scheduled to end on December 31, 2012, if Congress
does not act to extend certain tax breaks before then.
In December of 2010, Congress made short-term changes to our
gift, estate, and generation-skipping transfer tax system that are
scheduled to terminate at the end of this year. Currently, an
individual can transfer $5.12 million without incurring any estate
or gift tax. A married couple can transfer as much as much as
$10.24 million without incurring any estate or gift tax. The gift
and estate tax rate on transfers that exceed the sheltered amount
If Congress does not act before the end of the year, beginning
January 1, 2013, the estate and gift tax structure is scheduled to
"snap back" to 2001 law which would provide each
individual with only a $1 million exemption from estate and gift
tax and would have a top marginal estate and gift tax rate of 55%
on transfers of $3 million or more. Nobody knows for sure what our
future estate and gift tax law will provide, but for individuals
who are concerned about minimizing taxes and keeping family assets
in the family, it may be wise to take advantage of this
"window of opportunity" by gifting assets to family
members today to avoid the risk that 2001 law will return or that
Congress may freeze the exemption from estate and gift tax at an
amount less than $5.12 million.
For families wishing to take advantage of the current high
exemption, it is important to consider what assets make the best
gifts. Individuals should consider assets that are expected to
appreciate. In addition, taxpayers should consider the structure of
the gifts. Gifts can be made outright or in trust. Thus,
individuals can make gifts to young children or grandchildren yet
arrange for the gifted assets to remain in trust so that a third
party can invest the assets and use them for the young family
member's benefit. Families can even take advantage of special
kinds of trusts or other structures that can help leverage the
current high exemption.
Please contact a Dickinson Wright trusts and estate lawyer to
learn more about how you and your family best can take advantage of
the increased exemption before year end.
The IRS has promulgated regulations in Circular 230 that
regulate written communications involving federal tax matters
between attorneys and their clients. According to the IRS, such
communications are either opinions or "other written
communications". If a communication is not intended to be an
opinion, the writing must so state. Therefore, we must advise that
"this written communication which discusses federal tax
matters is not an opinion, and is not written to be relied upon to
avoid any tax penalty." Please contact us if you have any
questions concerning Circular 230 or any tax planning, implications
or consequences relating to your estate plan.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Internal Revenue Service has recently published an IRS Large Business & International Directive, which updates an earlier directive to field agents addressing the examination of capitalization and repair costs issues.