Murphy said she saw first hand with her own family that estate and gift planning can be challenging, but that good analysis is often done too late. It's important to have a plan in place to protect the wealth people have worked hard for over their lifetime from being heavily taxed.
Looking ahead to 2013, Murphy said the potential for the exemption to fall from $5.1 million to $1 million and the tax rate to increase from 35 percent to 55 percent means more individuals and families could be impacted by higher estate and gift taxes.
Gift taxes generally apply to the excess of gifts above the annual exclusion amount of $13,000 per person/per gifter for 2012 and $14,000 for 2013. This exclusion is available each year and for each recipient and does not dilute your lifetime exclusion. Transfers between U.S. citizen spouses are tax-free.
Generally the following gifts are not taxable:
1. Gifts that are not more than the annual exclusion for the calendar year.
2. Tuition or medical expenses you pay for someone.
3. Gifts to your U.S. citizen spouse.
4. Gifts to a political organization for its use.
Murphy recommends determining the value of your and possibly your spouse's financial estate and the needs for the individuals involved. Once that has been done, a plan can be put in place to find the best way to transfer assets without incurring estate tax liability.