Rich Passing Up $10 Million Opportunity to Gift Tax-Free

Legislation enacted in 2010, which raised the lifetime gift-tax exclusion to $5 million from $1 million for each person starting last year, is set to expire. For 2012, the inflation- adjusted figure is $5.12 million for each person. It will drop to $1 million on Jan. 1 unless Congress acts.

Money or property given while alive may be subject to the gift tax, and wealth transferred at death may incur levies applied to estates, according to the Internal Revenue Service. Under current law, an estimated 3,300 households may have to pay estate taxes this year, according to the Washington-based Tax Policy Center. The figure would increase to about 52,500 estates next year if the exemption drops to $1 million, data from the nonpartisan research group show.

"People are designating trustees in states such as New Hampshire and Delaware because so-called dynasty trusts can exist there without expiration dates and most assets in them may appreciate forever without triggering federal gift, estate or generation-skipping transfer taxes," said David Scott Sloan, co-chair of the Private Wealth Services team.

READ: Rich Passing Up $10 Million Opportunity to Gift Tax-Free