“2012 was even more intense,” said John Olivieri, an estate-planning attorney and partner in the private clients group at White & Case LLP. “As it got nearer to the end of 2012 and there was no extension in sight, that’s when everyone started doing trusts.”
In January 2013, after the higher exemptions had technically expired, Congress extended the gift-tax changes and permanently linked them to inflation. The exclusion this year is $5.34 million per person.
Permanent Feature
That permanent feature of the tax code means that the increase in nontaxable gifts in 2012 probably won’t last, said Harry Stein, associate director of fiscal policy at the Center for American Progress, a Washington group typically aligned with Democrats.
The U.S. raised $18.9 billion in estate and gift taxes in the fiscal year that ended Sept. 30, or 0.7 percent of federal revenue, according to the Treasury Department.
“While this isn’t the most important thing to people that care about the federal budget,” Stein said, “it is an extremely important thing to the people it benefits.”
The gift tax is designed to prevent people from avoiding the estate tax by making gifts to heirs during their lifetime. The top gift-tax rate was 35 percent from 2010 through 2012. It is now 40 percent.
The lifetime exclusion applies on top of an annual gift-tax exclusion, which is now $14,000.