- Days left
Currently gifts and estates of up to $5.12 million are exempt from taxes, but as part of the fiscal cliff, any portion of a bequest that exceeds $1 million will be taxed next year -- and at a 55% rate (currently, the rate is 35%). That will kick in unless Congress and the president agree to extend the current exemption or agree on a new one. Many older Americans are not waiting to see if that happens.

"It's crazy," said Richard Behrendt, Director of Estate Planning for Baird's Private Wealth Management. "I bet more wealth is transferred this year than in the past 10 years combined."
Jonathan Blattmachr, a principal of Eagle River Advisors in New York who has lectured groups of estate planners about the expiring exemption, said the amount given away in 2012 will be three or four times that of any other year.

The drop to a $1 million exemption means that the tax bill on gifts or estates of $5.12 million will go from zero this year to $2.266 million next year, according to Blattmachr. The gridlock in Washington could result in the exemption staying that low, perhaps for years.

"The fear is that we'll go over the fiscal cliff and never correct that," said Robert Keebler, a Green Bay, Wis.-based estate planner.

As long as the exemption stays at the million-dollar level, the estate of anyone who dies will have to pay at the higher rate, he said.

Estate and gift taxes affect not just the very wealthy. Many middle-class Americans have assets of more than a million. Now, they may feel like they need to give away more of their wealth before they die.

Not everyone who can transfer their money should do it, said Behrendt. Sure, if they're 93 years old and failing, it's a good idea. Others should proceed with caution, being careful not to part with assets they might later need.

"I worry about 65-year-old, recently retired couples on fixed incomes with $3 million or $4 million in assets reading about what a tremendous opportunity it is," said Behrendt.

Also, many people may be under the impression that if they give a gift below this year's $5.12 million exemption level, they'll still have some exemption left to use in the future. But any gift made this year counts against the exemption in effect the year they die. So if the exemption drops, as scheduled, to $1 million in 2013, a gift of a million or more made anytime in the past completely exhausts the exemption. The entire remaining estate will be taxed at 55%.

They also have to understand that, to qualify, the gifts must be permanent and irrevocable. The asset doesn't belong to them any more.

For example, many couples consider transferring their home, which is often their biggest asset, but want to remain living there for a while.

They can do that through a personal residence trust but since these cannot be sold while the trust is in effect, most people prefer another kind, a qualified personal residence trust.

Those, however, come with their own restrictions. For one thing, the givers must specify a term for the trust, the length of time they'll stay before their heirs take possession. Choosing the right term is crucial. The givers may be in good health and figure they have a good 10 years before they'll want to move. But if they die before the 10 year term is up, the house reverts back to the estate. "Then it's taxed like it was never given away," said Blattmachr.

Gifts made this year can keep on giving if astutely chosen, according to David Hryck, U.S. Head of International Tax at SNR Denton. That's because the value of transferred assets are figured at the market value at the time of the gift.

Thus, a $5 million stock portfolio transfers for free this year and any amount it appreciates between now and when the giver dies escapes the death taxes it would have been subject to had it not been given away.

Choosing what assets to transfer, then, is an issue.

"You have to do the math," said Hryck, an adviser to major entertainers and businesspeople. "You have to pick and choose which asset to give. You want to give away the one that will go up most in value."

If, for example, there's a choice between a hot tech stock and a slowly appreciating real estate holding, gifting the stock means the estate will pay less in tax.

But you never know. The tech company stock could tank and a new housing boom could send real estate soaring.

As the old Yiddish saying goes: Man plans and God laughs.

See more on CNNMoney:

Increase your money and finance knowledge from home

Timing Your Spending

How to pay less by changing when you purchase.

View Course »

Intro to Retirement

Get started early planning for your long term future.

View Course »

TurboTax Articles

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

Tax Tips for Uber, Lyft, Sidecar and other Car Sharing Drivers

When you're a driver for a ride-sharing company such as Uber, Lyft, Sidecar, or other car sharing service, the most important thing to understand about your taxes is that you are probably not an employee of Uber, Lyft or Sidecar. Drivers for these companies are usually independent contractors, a fact that has tax implications, both at filing time and year-round.

Add a Comment

*0 / 3000 Character Maximum


Filter by:

til I saw the paycheck which said $7938, I accept ...that...my mother in law woz trully taking home money part time from there pretty old laptop.. there sisters neighbour has been doing this for only 18 months and as of now repayed the morgage on their mini mansion and bought a great Lancia Straton. we looked here, Great60.com

December 17 2012 at 12:07 AM Report abuse rate up rate down Reply

harlson Obama got re-elected, never underestimate the power of stupid people in large numbers, of course he promised free stuff too for votes.

December 15 2012 at 12:41 PM Report abuse rate up rate down Reply

if so many NOBAMA ones in these comments .. how the hell did he win??

oh.. by the ones that can't type or read.. the majority..
as pissed off whites .. are now the minority..

how ya all liking the muslim now ..

December 15 2012 at 12:57 AM Report abuse -7 rate up rate down Reply
2 replies to harlson's comment

if so many NOBAMA ones in these comments .. how the hell did he win?
The reason Obama won is because we republicans are just brain dead.

December 15 2012 at 12:12 PM Report abuse +2 rate up rate down Reply
1 reply to boehnerisababy's comment

Look who is calling people brain dead. Captain fried cranial Evan Barthold

December 15 2012 at 12:18 PM Report abuse -1 rate up rate down

Voter registration fraud, food stamp and welfare.

December 15 2012 at 12:38 PM Report abuse -1 rate up rate down Reply

I hope all those wealthy celebrities who cried there hearts out in campaign commercials how badly they needed Obama to win a second term are comfortable with the fact that they sooo desperatley needed Obama to win a second term so they could lose millions of dollars in taxes .

December 14 2012 at 11:17 PM Report abuse -6 rate up rate down Reply

omg cry me a river for the richest of the rich

Phasedump will be crying a river when there's no one left to fund his welfare check.

December 14 2012 at 9:39 PM Report abuse -13 rate up rate down Reply
1 reply to obamasafiasco's comment

He can move to Cuba, they like Com/Libs there.

December 14 2012 at 9:44 PM Report abuse -10 rate up rate down Reply

When our forefathers wrote in the Constitutuion, the right to bear arms America back then didn't have as many guns as there is today. Today, mentally unstable person can get a gun, terrorist can buy a gun, the Mexican Cartel can buy a gun here in the USA. If our forefathers were to see what is happening today they would be rolling in their graves!!!!!!!

Yeah and now if you need a gun the Obama adminsitration will just give you one like they did with the Mexican drug cartels.

December 14 2012 at 9:37 PM Report abuse -12 rate up rate down Reply
1 reply to obamasafiasco's comment

Evan can't handle the fact that Obama and Holder aid terrorists and drug cartels.

December 14 2012 at 9:39 PM Report abuse -10 rate up rate down Reply
4 replies to s.kohanski's comment

I feel bad for the wealthy. It won't be long before they can't afford to buy politicians.


I feel bad for the Obamabots. It won't be long before the wealthy will no longer afford to fund the Obamabots welfare checks.

December 14 2012 at 9:35 PM Report abuse -8 rate up rate down Reply

Did somebody say oops? I mean opps......HEE......HAW!!!!!!!!!!


Another pathetic screen name created by an Obamabot.

December 14 2012 at 9:32 PM Report abuse -11 rate up rate down Reply

We already know Obama cares, that is why he beat Mitt Romney. Mitt Romney and the republicans don't care, that is why they lost the 2012 elections..............


Obama only cares about Obama. Obamas is one of the 1%.

December 14 2012 at 9:31 PM Report abuse -9 rate up rate down Reply

Obama care strikes again.

December 14 2012 at 8:38 PM Report abuse -11 rate up rate down Reply