Giving away millions isn’t what it used to be for wealthy Americans…
In 2013, the federal gift-tax exemption rate will only allow citizens to give up to $1 million in his/her lifetime tax free. Up until then, Americans are allowed to give up to $5.12 tax-free. Also included is a rise from 35% to 55% in the top gift-tax rate.
Americans with the means to do so are rushing to gift away valuables such as stocks, cash, real estate and artwork before the year’s end. The filings should begin before Thanksgiving or people are likely to miss out.
Many tax advisers recommend irrevocable trusts as a solution to hold gifts for future family members, not just the next generation. As opposed to a revocable trust, money that goes into an irrevocable trust can’t be pulled out again in a market downturn or in other circumstances that lead to the giver’s loss of fortune.
Although unlikely, clients are also worried that the IRS could claw back tax savings on estates. The fear is that heirs of someone who makes a gift this year may owe more tax than expected if the person dies when the exemption is lower and rates are higher. Lifetime gifts are added to the value of a deceased’s estate.
Gifting Booms Before New Tax Laws Kick In
By Arden Dale, The Wall Street Journal
October 16, 2012
