During this time of year most people are frantically running about trying to finish up their Christmas shopping and getting those last minute items for the kids and grandkids. It can be a very stressful thing to try and shop for those that you love the most, especially when you are dealing with the crowds, the parking, and the hustle and bustle of the holidays. There is a way to avoid having to go out and fight the crowds, give a wonderful present and reduce your tax liability at the same time.
Just this month I have had a handful of clients come in and inquire about what they can do to reduce their estate tax liability knowing that the estate tax exemption amount is no longer going to stay at $5,120,000 per person once we get into 2013. As the law currently stands the estate tax exemption amount is going to drop to a $1,000,000 exemption on 1/1/2013, and a tax rate up to 55% for every dollar surpassing the exemption.
I have told every one of these clients that have come in to see me that if they were ever thinking of making a gift to their loved ones, this is the year to do it. And, the Christmas holiday is the perfect time to make such a wonderful gift!
There are all sorts of ways to create the gift that will reduce tax liability and take advantage of an exemption that we may never see again. Some of the gifting ideas I have shared with my clients consist of the following:
- Pay off your loved ones’ mortgages;
- Fully fund 529 plans for kids/grandkids;
- Pay off any of your kids/grandkids student loans.
The key is to take advantage of the gifting opportunity that will be expiring in less than two weeks. We may never have another opportunity to gift this much again without suffering a tax consequence. If you have the ability to make a large gift before the end of 2012, please come in and see us and we can walk you through how this can be done to effectively minimize estate taxes when you pass away.