Tuesday, February 22, 2011

Congress Gives Its Biggest Gift Ever

How does giving or receiving $5 million or even $10 million tax free sound to you?  That’s what I thought.  

To recap:  As part of the tax deal passed by Congress late last year, the gift-tax exemption jumped to $5 million from $1 million for individuals and to $10 million from $2 million for couples in 2011 and 2012.

That means people can give away that much without paying a penny in taxes.  Even more, the tax rate on gifts above those amounts fell to 35% from a scheduled 55%.

This unexpected gift should prompt you to at a minimum review your estate plan, and maybe even throw away your old one and craft a new one before these favorable laws expire.

This favorable gift from Washington combined with specialized estate planning tools can increase the amount of the tax free gifts by 30%-50%.

It is important to note that this gift from Congress is set to expire after 2012, which gives you a two year window of opportunity.  While we hope Congress extends the current law beyond 2012, the current debt crisis and the level of spending could spell doom for any extension.

Besides the wealthy, who can benefit the most from this act of kindness?  Small and family owned businesses.  Those business owners who want to transfer the business to the next generation or to key employees have an unprecedented opportunity. 

I expect the greatest transfer of wealth in American history will take place in the next two years.

Here are links to recent articles discussing this gift tax break: http://on.wsj.com/i98Imy and http://bit.ly/gUakzT

The take away:  don’t put off your planning, take advantage of this opportunity.

Jason Salinardi

BridgeBuilder

Thought for the Week

“We are what we repeatedly do. 

Excellence, therefore, is not an act but a habit.”

- Aristotle