Take Advantage of Annual Gift Tax Exclusions Before It's Too Late

The first $13,000 of gifts ($26,000 for married couples who split gifts) made by a donor to each donee in calendar year 2011 is excluded from the amount of the donor's taxable gifts. (The exclusion remains at $13,000 for calendar year 2012.) These exclusions can save both transfer tax for the donor and family income taxes. The transfer is free of gift tax. Estate tax can be saved because both the value of the gift on the date of transfer and post-transfer appreciation (if any) in the value of the gift aren't included in the donor's estate. Family income tax savings can be realized where income-earning property is given to family members in lower income tax brackets.

Don't wait!  Taxpayers must act no later than Dec. 31 to take complete advantage of annual exclusions. Unused annual exclusions can't be carried over and are forever lost.  Finally, if a gift is made by check near the end of 2011 and the donor wants to take advantage of the exclusion this year, the donee should be urged to deposit the check before year-end, so that there's no doubt as to when the gift was made.