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Generous 2012 Gift and Estate Tax Opportunities Extend Beyond the Gift Itself

As the end of the year rapidly approaches, many clients are considering gift giving to take advantage of the most generous lifetime gift tax exemption that Congress has ever allowedThis is especially important now because this generous exemption expires at midnight this coming December 31 and likely will not to be extended into 2013. 

The generous gift tax exemption mentioned above is currently $5,120,000.00 per person.  On January 1, 2013, the exemption drops by over $4,000,000.00 in value, to $1,000,000.00.  Thus, gifting this year instead of next year can have an immediate estate tax savings of approximately $2,000,000.00.  This holds true even if the gift is made to a certain type of trust under which the donor can retain a beneficial interest.  

Perhaps more importantly, gift giving of this sort also removes from the taxable estate all of the future appreiation on the gifted property.  

 The following table illustrates how much will be removed from a donor’s estate who makes a gift valued at $5.120 million if the gifted asset(s) grow at rates of 3% and at 10% over periods of 10, 20 or 30 years.  For example, if assets worth $5.12 million are gifted before December 31, 2012, assets worth about double (over $9,000,000.00) will be removed from the donor’s taxable estate after 20 years if the gift appreciates at an annual rate of only 3%. 


            Rate of  Return:                           Number of Years:

                               10 years                        20 years                          30 years

            3%             $ 6.881m                       $ 9.247m                         $12.428m

           10%            $13.280m                      $34.445m                         $89.340m

A qualified appraisal will most likely be needed, so an individual’s planning will need to allow adequate lead time for this to be


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Barry S. Engel
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