In the early part of 2010, Congress enacted extraordinary income and gift tax relief. The move avoided the previously scheduled return to higher tax rates that existed before the tax relief act was originally enacted.
This relief, however, was temporary and will end as the calendar rolls over to 2012. The actions taken by Congress in the future are unknown as are whether these favorable rates will be around through the New Year; tax rates will almost certainly be higher than they exist now. Consider taking advantage of this relief. The gift tax exemption is now up to $5,000,000 (from $1,000,000) and may be used even if prior lifetime gifts have been made. Essentially, this exemption has the effect of reducing future income and estate tax liability under most circumstances, particularly if appreciated assets are given.
Another gifting opportunity not to be forgotten is the annual gift tax exclusion. Without any gift tax or even a requirement to report the gifts, you and your spouse may each give up to $13,000 this year to an unlimited number of individuals including children, grandchildren and great-grandchildren. This exception is set to remain at $13,000 for 2012.