Congress has given taxpayers a historic opportunity – 2012 gift tax exemption

A donative promise or set of spousal access trusts can lock in 2012 gift tax exemption.

Congress has given taxpayers a historic opportunity in 2012 to make up to $5.12 million of lifetime gifts without paying gift tax. Unfortunately, only the very wealthiest are likely to take advantage of the opportunity. Even less affluent taxpayers, however, can make a taxable gift fairly painlessly by making an enforceable promise to pay a substantial sum in the future. Such a promise, even in an intra-family situation where there is little chance that the promise will be enforced, may, if enforceable, successfully use up the increased gift tax exemption while it is still available.

Alternatively, to claim the benefit of the current $5.12 million estate and gift tax exemptions before they expire, gifts may be made before year end using spousal access trusts. If a married couple wish to make use of their $5.12 million gift tax exemptions, but are concerned about providing for themselves, each can create a spousal access trust (SAT) for the benefit of each other. [Source: Estate Planning, August 2012]

These transactions must be carefully structured and are not free from risk, and should be considered only in consultation with qualified estate tax counsel. Contact Brian Monbouquette who can help with your planning and introduce you to counsel, if necessary.

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Brian Monbouquette CPA brianm@fahrenheitfinance.com