The lifetime gift tax exemption limit of $5.12 million will expire at the end of the year, unless Congress takes action before then to extend the deadline. With only a handful of months remaining and a presidential election coming up, it’s unlikely that Congress will extend the exemption deadline, which is why estate planning attorneys across the country are being inundated with work.
The law currently allows each individual person to give other individuals up to $13,000 per year in tax exempt estate gifts. As long as the gifts do not exceed the $13,000 limit, or the total amount of the gifts do not exceed the $5.12 million lifetime limit, no taxes need to be paid on them. Beginning in January, however, the lifetime limit will revert back to its traditional $1 million level. Anything over that limit will be taxed at 50 percent.
Though four months may seem like a long time, it’s important to know that taking advantage of the gift tax exemption often requires careful and time-consuming steps that cannot be accomplished quickly. A good gift tax plan can take weeks to plan and months to implement. This means that if you haven’t begun planning already, you need to act quickly. Though the $5.12 million limit may sound like it only applies to extremely wealthy families, anyone with significant assets should schedule an appointment with their estate planning lawyer at the first opportunity.