The next seven months provide tax-free gifting opportunities for many that may never be available again. The 2012 federal estate, gift, and generation-skipping transfer tax rates are the lowest (35 percent), and the corresponding exemption amounts the highest ($5,120,000), they have ever been. And, unless Congress takes action, these rates are scheduled to increase (to 55 percent, or 60 percent for estates over $10,000,000), and the exemptions to decrease (to $1,000,000, except that the exemption for the generation-skipping transfer tax will be adjusted for inflation), effective January 1, 2013. Given that no one knows with certainty what Congress will do, if anything, individuals should explore and take advantage of the current tax-free gifting opportunities available to them, and quickly.
By taking action in 2012, an individual can remove up to $5,120,000 (or $10,240,00 if married) of assets from his/her estate that would otherwise be subject to the federal estate tax upon his/her death. But this opportunity is not just for the very wealthy. Unmarried couples; individuals who make gifts of more than $1,000,000; and individuals who used up their lifetime gift tax exemption prior to 2012 when it was a lower exemption amount; may also benefit from the current tax-free gifting opportunities available this year.
Simply writing a check to effectuate an outright gift is one way to do this. But other options include forgiveness of debts, transfers of real property, and other sophisticated transfer vehicles that maximize the tax-free transfer of wealth, such as: gifting interests in family limited partnerships or family limited liability companies; Grantor Retained Annuity Trusts (GRATs); Intentionally Defective Grantor Trusts (IDGTs); other special types of trusts; intra-family sales; and other bona fide transactions.
Now is the time to meet with your team of trusted advisors, including your accountant, financial planner, and estate planning attorney, to explore the options available to you and implement a plan that is unique to your situation before this valuable tax-free gifting opportunity expires at the end of the year.
For more information, contact Melisa Mysliwiec at Fraser Trebilcock, 40 Pearl Street NW, Suite 910, Grand Rapids, Michigan 49503, (616) 301-0800, or e-mail her at firstname.lastname@example.org. You may also reach Melisa, or any other member of Fraser Trebilcock’s Trusts and Estates Department, at its Lansing office, located at 124 West Allegan Street, Suite 1000, Lansing, Michigan 48933, (517) 482-5800.