Mary Ann Jacobs, Esq.Under federal law, there are normally three taxes that are imposed on the transfer of assets: 1) the gift tax; 2) the estate tax; and 3) the generation-skipping tax. The gift tax applies to transfers made during life. The estate tax applies to transfers at death. The generation-skipping tax applies to transfers during life or at death that skips the children’s generation and goes straight to grandchildren, great-grandchildren, etc.

On January 1, 2013, the current estate tax rate and exclusion limits are set to change. The current estate tax rate is 35% on assets over $5.12 million. Unless Congress acts in the next four months, the new rules will tax estates with more than $1 million in assets at a rate of 55%. As a result of the uncertainty in Congress, planning now to take advantage of the current rates is more important than ever.

Gifting your assets is a way to take advantage of the current tax rates. In 2012, an individual can gift free of federal gift taxes up to $13,000 per person. Any gift over $13,000 counts against the $5.12 million lifetime exclusion-the amount set to change to $1 million in 2013.

Gifting has long been an essential wealth management and estate planning tool. Individuals can still benefit from transferring assets even if they are not in a position to transfer the full lifetime exclusion amount. There are many options for gifting. Each person’s situation is different, so carefully consider yours and how gifting your assets before death will benefit you and your loved ones.