As I heard it described by another professional, “we bungee-jumped off the fiscal cliff last week.” And what a wild ride it was! As a firm, we are grateful to the many clients that heeded our advice and made taxable gifts in 2012 in preparation of the “fiscal cliff.” Now that the dust has settled, what is the final result?
The gift and estate tax exemption amounts remain unified and unchanged at $5 million and this amount is indexed for inflation which is estimated to be $5,250,000 for 2013 (It was $5,120,000 for 2012). The only real change to the estate tax laws was an increase of the top gift and estate tax rate from 35% to 40%. Most planners felt fortunate that we were also able to keep “portability” of the exemption amount between married spouses.
Clients that made gifts in 2011 and 2012 did not waste time and legal fees. Planners agree that it is/was still a good time to make taxable gifts because property and business values are lower than they were a decade ago (at least in Las Vegas). Furthermore, a gift of property that may appreciate also moves the appreciation out of the estate of the one making the gift. As the exemption amount continues to increase over time with the inflation adjustment, additional room will be created for people to engage in further gifts or to protect a portion of their retained taxable estate.
The nice thing about the laws that were passed on January 1, 2013, is that there were no built-in sunsets, reversions, or expiration dates. For the first time in twelve years, things in this area of the law are settled and permanent unless Congress decides to change the law.