The year of the gift tax: now is the time to lock in estate tax savings.

• Author: Foss, Mary Kay

What's so Special about 2012 sifts? A number of things. To start, the exemption from the actual payment of lax is the highest in history:

$120.000. Nexy. the lax rate is the lowest in history: 35 percent. The gift tax exemption is the same as the estate tax exemption both of which are at the historic highs. In 2013. The gilt and estate tax exemption and highest tax rate to 2001 levels: SI million and 53 percent. With higher rates on the horizon. this is the time to lock in estate tax savings.

Another possible advantage to 2012 gifts results from the "portability" provisions of the 2010 tax law the same law responsible for today's low rate and higher exemption. With portability. the death of a spouse who did not need the entire estate tax exemption gives rise to an additional amount that can be used by the surviving spouse. A survivor can use the Deceased Spousal Caused Exclusion Amount DSUEA before Dee. 31, 2012, if it was created by a death in 2011 or 2012.

For example. if Fred died in June 2011 with a taxable estate of $3 million, a $2 million DSUEA would be created that could be used by the estate of his surviving spouse. Rita. Rita could also use the DSUEA for gifts. Unfortunately, the DSUEA and portability are set to expire Dec. 31, 2012. so the time is now to using this benefit before it expires. The IRS recently issued temporary regulations on how to elect to use the DSUEA and identical proposed regulations. The regulations require the executor or a non-appointed executor such as a trustee; to calculate the DSLIA under rules provided. Specific practical situations are explained; how the rules apply when the surviving spouse has multiple deceased spouses is one situation that wasn't) clear before the release of this guidance.

Is There a Downside?

There has been published concern about clawback, which is the term used for the possibility that gifts made during a time or hr rates and exemption will 1w clawed back to the estate or the donor who passes away in a year or high rates and low exemptions. Estate planning 706 as designed would not assess the additional tax. The AICPA has written to COngress requesting that clawtack be officially made impossible by law.

How Are the Gifts Reported?

The U.S. Gilt Tax Return. Form 709) is filed on a calendar year basis, reporting all gifts made in the year. There are some items that are specifically exempt from the definition of a gill and are not reported, (direct payments of medical and higher...