The federal gift tax lifetime exemption, which had never been greater than $1 million since the present gift tax was enacted in 1932, has now been increased to $5 million under the 2010 Tax Act signed into law on December 17, 2010.
This presents a unique opportunity for you if you have already used all or nearly all of the previous $1 million exemption. You will now be able to make additional, substantial gifts up to the new $5 million limit, without any federal gift tax whatsoever.
If you have been "on the fence" about making substantial gifts, now would be the time to put your gift-giving plan in place, since these 2010 Tax Act provisions expire December 31, 2012, unless they are extended by Congress.
In addition, the federal GST tax exemption has also been increased to $5 million. This increased GST exemption greatly expands your ability to make gifts that can pass over several generations without giving rise to any federal estate, gift, or GST tax.
These greatly enhanced exemptions can also be used in more sophisticated strategies such as grantor retained annuity trusts (“GRATs”), sales to grantor trusts, and personal residence trusts, where the exemption can potentially be "leveraged" to further increase the amounts passing federal gift and estate tax free to your donees.
The magnitude of these new and generous changes to the law is historically noteworthy. The relatively short duration of their assured application, however, makes it especially important that plans be initiated soon to accomplish your gifts in the manner and amount that you may wish.
We encourage anyone who is interested in taking advantage of these greatly expanded gift-giving opportunities to start the process soon, so that a thoughtful and timely plan can be implemented well before these increased exemptions are set to expire.
