The Tax Exemption Problems

As I have previously discussed, Congress set the estate, gift, and GST Tax Exemption at a historically high level for 2012. In the case of the gift tax, Congress set the lifetime gift tax exemption at $5.12 million through the end of 2012. Now, a distinct group of people are faced with a challenge. Should they take advantage of a once in a lifetime gift tax exemption? Or should they not take the exemption because they are worried about not having enough income to support themselves for the rest of their lives? 

This group of people is not compromised of those who have a 9-figure estate or the wealthiest Americans in our country. For those people, using the gift tax exemption is not a question at all. This has only become an issue for those are legitimately concerned with not any enough income to sustain themselves if they make this gift and their financial situation changes for the worse. Unfortunately, time is also an issue here. Most financial advisors claim that it takes at least 3 months to make a gift of the size of the exemption, and if these people want to take advantage of the tax exemption they must make a decision soon.

See Paul Sullivan, To GIve or Not to Give, Up to $ 5.12 Million, New York Times, June 22, 2012.

Special thanks to Jim Hillhouse(Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.