The 2010 law governing gift and estate taxes will expire at the end of 2012. Starting in 2013, the lifetime limits on gift tax will drop from $5.12 million to $1 million. Also, the top gift tax rate will rise from 35% to 55%. While this is still subject to change by congress, experts seem to believe the exemption will drop to some degree no matter what.
If you own a family business and haven’t yet made your succession plans, now might be a very prudent time to do so. With the new rules in place, transffering ownership of your company to a trust or directly to an individual will result in a much heavier tax burden than if you were to transfer these assets before the end of the year.
Of course, there are many more components to consider in succession, so even though it is wise in regard to taxation to do so this year, make sure your succession and gifting plan makes sense for you, your family, and your business.