The estate tax deal for 2011 clarified that estate tax exemptions had been raised to $5 million for each person or $10 million for married couples. But some New Yorkers may not have realized that the lifetime gift tax exemption was also expanded this year and kept in sync with the estate tax exemption.
Susan Colpitts, a co-founder of the Virginia wealth advisory firm Signature, said this year's gift tax exemption gives people an "opportunity to see that money be used and appreciated by your beneficiaries." According to The New York Times, there is also a greater incentive for people to give away their money during their lifetime instead of after death.
Many families might reconsider how they transfer their wealth, considering the $5 million gift tax exemption allows a person to make gifts every year to an unlimited number of people. The maximum amount of money you can currently give to one person without having any taxes imposed on your gift in 2011 is $13,000.
Many estate lawyers and advisers are encouraging clients to make large gifts now because it is still unclear what could happen to the exemption after 2013. For instance, New Jersey estate attorney Martin Shenkman said same-sex or unmarried couples could see the higher gift exemption as a “golden opportunity” for them to shift their assets.
However, there are a few potential problems that some lawyers are concerned about, including:
- Inadvertent disinheritance risks if a trust document doesn’t clearly state the specific dollar amount that should be left to certain individuals; and
- The so-called “portability” feature, which makes it easier for married couples to add the unused portion of a deceased spouse’s exemption to their own estate.
To find out how you can benefit from the gift tax exemption, talk to an estate planning attorney who can explain your legal options and provide proper counsel.