With the government's $5.12 million gift-tax exemption set to fall to $1 million at year-end, more families are using the current leeway to do some financial housekeeping, experts say.
The clock is winding down on the first half of 2012 - the “Year of Gifting.” With the nation’s capitol rather rancorously heading into election season, the time for “cleanup gifts” is closing. In fact, “cleanup gifts” were the subject of a recent article in The Wall Street Journal titled “A Golden Age of Gift Giving.”
With the historically generous $5.12 million gift-tax exemption set to expire on December 31, 2012, this may be the time to cleanup gifts among your family so your family members are treated equally. For example, say you made a “loan” in the past to a family member that likely will never be repaid (and may even be challenged by the IRS anyway as being a “gift” rather than a “loan”). Why not consider “forgiving” that loan in 2012 and thereby convert it into a current “gift” within the current generous gift tax exemption?
Forgiving family loans has to be done correctly, so it’s important to secure competent legal counsel before taking action.
Reference: The Wall Street Journal (May 25, 2012) “A Golden Age of Gift Giving”