Law Office of John S. Palmer Attorney at Law

(425) 455-5513

Federal Estate and Gift Tax Update

Posted Tuesday, June 5, 2012 by John S. Palmer

The status of the federal estate and gift taxes for 2013 forward remains unclear. Under legislation passed in 2010, the exemption amount for both taxes will be $5,120,000 until December 31, 2012 ($5 million, indexed for inflation). Unless new legislation is enacted by then, these exemption amounts will automatically decrease to $1,000,000 starting next year.

There are several proposals currently being considered in Congress to address this issue, including:

In light of the fact that Washington State has no gift tax (though it does have an estate tax with a $2 million exemption amount), some high-net worth individuals are taking advantage of the current federal law to make tax-free gifts of up to $5,120,000 this year (or up to $10,240,000 for married couples). Although this would entirely use up the entire federal exemption amount of the donor(s), it can have the benefit of substantially reducing their potential estate tax liability, because the principal gifted, and any future appreciation in value, will not be included in the donors’ taxable estate.

However, such large-scale gifting should not be done without first consulting with an attorney and financial advisor to evaluate such things as other potential tax consequences of such gifting (including income taxes and capital gains); whether to make gifts outright or in trust; strategic selection of assets to be gifted for maximum tax benefit; and the amount to be gifted, taking into account any prior taxable gifts and the future needs of the donor(s).

If you have any questions or would like to schedule an appointment, please call us at (425) 455-5513, toll free at (877) 455-5513, or

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Law Office of John S. Palmer11911 NE 1st St, Ste. B204,Bellevue, WA 98005-3056