Our readers in the Sacramento area have surely heard about the impending federal estate tax break which is set to expire on Jan. 1, 2013. Anyone concerned about estate planning and avoiding unnecessary taxation should consider acting immediately to take advantage of the expiring estate tax exemption, as it could mean saving a significant amount of money down the line.
Currently, a single person is allowed to give up to $5.12 million in gifts free from estate and gift taxes. Unless Congress acts, and acts very rapidly to extend the exemption, this number will decrease to $1 million.
For affluent Californians looking to pass as many tax-free assets to family members and other loved ones, this change will mark a tremendous difference. "My guess is that these are the best rules you're going to get in your lifetime," said the director of a large national accounting firm. Most people have already made plans to take advantage of the tax exemption, but those who have not will want to assess their plans immediately.
For many gifts such as real estate, businesses and other illiquid assets that require an appraisal, it may already be too late, since the appraisal process can take several months. There is still time to begin transferring assets in the most efficient manner possible, but many estate planning attorneys are cautioning people not to wait a day later than they have to.
Good estate planning starts long before a person's death; it should be an ongoing and well thought out lifetime process that ensures that a person's estate is handled in the most effective way possible. This includes taking advantage of tax breaks.
Source: The Wall Street Journal, "No playing chicken with estate tax deadline," Charles Passy, Oct. 2, 2012