Federal Estate Tax and Lifetime Gift Tax Exemptions Offer Special Opportunity to Advance Cure-Focused Research

The “portability” feature that Congress added to the tax law further simplifies estate planning for married couples.

June 1, 2012 (Hollywood, FL) – The calendar year 2012 may turn out to be one of the best years for making a gift to the Diabetes Research Institute Foundation during your lifetime.  

The current federal estate tax and lifetime gift tax exemptions are unified at an all-time high this year. Both are scheduled to revert to $1 million in 2013 unless Congress extends or makes other changes to the law.  Key aspects of the current law include the following:

•When Congress extended the Bush tax cuts through 2012, the lifetime gift tax exemption rose from $1 million to $5 million ($10 million for married couples).  The law also provided that beginning in 2012, this amount would be indexed for inflation.  On January 1, 2012, the exemption was adjusted upward by $120,000, resulting in an exemption of $5.12 million.

•Individuals can now make gifts of $5.12 million dollars (less gift tax exemptions previously used).  Married couples who have used their $1 million lifetime gift tax exemption can now shift an additional $4 million out of their estates.  Those who had exhausted their combined $2 million exemption under the old law can now shift an additional $8 million through gifts.

•The “portability” feature that Congress added to the tax law further simplifies estate planning for married couples.  Under the new law, surviving spouses can use the unused portion of a deceased spouse’s exemption to reduce their estate tax.  For example, if a deceased husband used $2 million of his $5 million in lifetime exemptions, the unused $3 million at his death could shelter that amount of his wife’s estate.  ♦♦♦ Caution: The new rules expire after 2012, so the portability of a deceased spouse’s unused exclusion amount won’t help surviving spouses after 2012, unless Congress extends the rule beyond 2012.

•According to the law enacted in December 2010, estates valued at $5 million or less at death in 2011 were exempt from the estate tax. Estates worth more than $5 million are taxed at a 35 percent rate.  For 2012, the estate tax exemption increased to $5.12 million, thanks to inflation.

•In estate planning, you also must consider the unified credit, which integrates the federal gift tax and estate tax into one unified tax system. This is the credit for the portion of estate tax due on taxable estates. For example, if you exceed the annual gift tax exclusion amount in any year, you can either pay the tax on the excess or take advantage of the unified credit to avoid paying the tax. The unified credit enables you to give away $5.12 million ($10.24 for couples) during your lifetime without having to pay gift tax.

•By using the unified credit during your life, you’ll reduce the amount available to offset the estate tax upon your death. If, however, you pay the gift tax, such taxed gifts are added back to your estate, and the estate tax is recalculated, with the gift taxes you previously paid credited against any final estate tax due.

There are a number of ways that you can transfer assets that qualify for the current 2012 exemption amounts while also enabling you to make a charitable gift to advance the DRI’s most promising cure-focused research.  For more information, please contact Jill Shapiro Miller, Vice President of Gift Planning, at or at (800) 321-3437.

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