December is definitely the season for giving.
And tax-related gift are the focus of the fourth installment of Reindeer Year-end Tax Tip Games 2012.
Vixen, the reindeer who definitely personifies Merriam-Webster's third definition, has received her share of presents over the years.
So it's fitting that she's suggesting that folks concerned about possible estate tax implications take advantage of that law's gift tax exemption this year.
Right now, the estate tax exclusion (that's the value of an estate that escapes taxation) and unified lifetime gift exemption (that's the amount of your estate you can give away to others while you're still around to get their thanks in person) is $5.12 million.
But if Congress doesn't act, that amount will plummet to $1 million. In addition, the maximum estate tax rate will jump from 35 percent to 55 percent.
To avoid the possible limitations and keep as much as possible from being taxed more, folks with estates worth more than $1 million might want to transfer some of it to family and friends now.
You can give up to $13,000 per person in 2012 without having to file a gift tax return. You can make as many $13K gifts as you want. And if you're married, you and your spouse can each give the $13 grand to the same person(s).
If you think cash is too crass and prefer to give something else, say your great-granmother's diamond
necklace valued at $13,000 or less, you can give that part of your
estate instead.
While most rich folks make gifts to their kids and grandkids, you don't have to keep it in the family (hint, hint). You can give a $13,000 gift to anyone (just in case you missed it earlier, hint, hint).
As for the lucky recipients, the monetary or equivalent property gifts are not taxable income.
Of course, giving away such large amounts is not something to be done lightly. You should touch base with your financial planner and estate tax specialist to make sure this is an appropriate move for you. They also can recommend whether a particular type of trust would be a tax-smart and family-wise way to make such gifts.
Just make that adviser appointiment soon. You must hand out your year-end tax-free financial gifts by Dec. 31.
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