The 2012 gift tax exclusion is a whopping $5,120,000. It is scheduled to drop to $1,000,000 in 2013.
If you have an estate value greater than $1,000,000 or greater than $2,000,000 if you are married, you may, depending on your age and your relationship with your children, want to take advantage of this year’s big gift tax exclusion by making significant gifts to your children, thereby reducing or eliminating your potential estate tax.
And if you do make gifts to your children, we highly recommend you use irrevocable gift trusts.
If you make outright gifts to your children, the gifted asset could be fair game in a lawsuit or divorce claim against your child. If you make gifts in trust, the gifted asset could be significantly protected from lawsuits or divorce claims against your child. If you make a gift, why not protect the gift?