The Bush tax cuts which were enacted in 2001 and 2003 were originally set to expire on January 1, 2011. However, Congress and President Obama temporarily extended the Bush tax cuts through 2012. The Obama administration did not only extend the tax cuts but also increased the estate tax, gift tax, and generation-skipping transfer tax exemptions from $1 million to $5.12 million in 2012.
Accordingly, an estate of a decedent, who dies in 2012, that has a net value of $5.12 million or less can be passed on to its heirs completely exempt from the estate tax. Individuals can also avoid paying hefty taxes on lifetime gifts of up to $5.12 million for gifts made before the end of the year. So for those who has the capacity to take advantage of the lifetime gift tax exemption, it is best to act now before it expires in 2013.
*This blog entry was not written by an Attorney and should not be construed as professional legal advice.