As you may know, the exemption for both gift tax and estate tax
purposes for the balance of this calendar year is $5,120,000 per
person. That means that an individual may gift that amount (reduced
by prior taxable gifts) without paying any gift tax and, in the
case of a married couple, the aggregate opportunity to make
tax-free gifts is $10,240,000 (again, reduced by prior taxable
gifts). The current provisions of the Internal Revenue Code that
provide this very generous exemption will "sunset" on
December 31, 2012 and, unless Congress passes legislation extending
or modifying the current exemptions, the law will automatically
change on January 1, 2013; the exemption per taxpayer will go back
to $1,000,000 ($2,000,000 for a married couple) and the applicable
rate for gift and estate tax purposes which is currently 35 percent
will increase to 55 percent.
