In late 2010 Congress handed wealthy tax payers a golden opportunity to shift millions of dollars out of their estate with no transfer tax liability. To the extent not already used, this golden opportunity allows individuals ($5.12 million) and married couples ($10.24 million) to gift from their estates without incurring any transfer tax. Without an act of Congress, this unique planning opportunity is set to expire at the end of 2012 when the current law sunsets and lifetime gifts will again be limited to $1 million per person, $2 million per couple.


While this only applies to a small subset of Americans (generally those whose estates are $5 million to $10 million or more), the fact that this opportunity is significant, and fleeting, suggests clients should give it due consideration. At the extreme, one might choose to move as many assets as reasonably possible (up to $5 million or $10 million) to children or grandchildren and reap the potential benefit of saving millions of dollars in estate, inheritance, gift, or generation skipping taxes. However, our clients have come to expect a high level of detailed and critical thought given to recommendations, and this decision is no different.


The grantor of such large sums must be comfortable they will not need the gifted assets later in life considering all variables, including the volatility of capital markets. They must also consider if such a gift would impede their heirs from developing an appropriate respect for creating and managing wealth. Lastly, because of the potentially large change, there is the possibility of a tax “claw back” if the gift and estate tax exclusion does in fact revert back to $1 million at the end of 2012.


The sun may be setting on a golden opportunity to save millions of dollars in future estate, inheritance, gift, or generation skipping taxes, but proceed with caution. If you have not already considered this planning opportunity with your advisor, please contact SYM immediately to determine if your unique financial situation potentially calls for a large transfer out of your estate before the end of 2012.