Clients considering gifts to their families and charities should begin planning now so that they are prepared for changes in the gift, estate and generation-skipping tax laws that are scheduled to take effect on January 1, 2013.
Unless Congress and the President reach an agreement on tax legislation before the end of December, an unlikely event in this election year, there will be significant and automatic changes to the tax laws for 2013.
Among many other changes, the exemption from the federal gift, estate and generation-skipping transfer tax will decline from $5.12 million to $1 million per individual, and the top tax rate will increase from 35% to 55%.
Until the end of 2012, each individual can give $5.12 million (less the amount of any prior gifts) outright or in long-term trusts for their families without paying any additional federal gift tax. A couple can give $10.24 million. If you are in a position to give, you should consider whether you would like to make a gift before the year is over.
Interest rates are also now at historically low levels. This makes certain types of sophisticated planning — including Grantor Retained Annuity Trusts, Charitable Lead Trusts, and inter-family loans — very attractive planning options in 2012. In addition, any new tax legislation may curtail the efficiency of these planning vehicles.
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.
