Not since enactment of the first federal gift tax in 1924 had there been such a strong incentive as there was in 2012 to give property to one’s heirs during one’s lifetime, and to do it right away. Part of the so-called "fiscal cliff" was the prospect that the lifetime exemption for passing property tax-free to one’s children and grandchildren would go from $5.12 million per person in 2012 to $1 million per person in 2013. The automatic expiration built into the Bush-era tax reductions would have returned the lifetime exemption to that amount, and President Obama’s position was that the exemption applicable to decedents’ estates could be larger, but that $1 million should be reinstated as the limit on tax-free gifts during a lifetime.
By kickoff time at the Rose Bowl, however, the fiscal cliff looked more like a speed bump. Except for a hike in the federal gift and estate tax rate, to 40 percent, most favorable aspects of 2012 law remained unchanged. The New Year’s Day tax bill included none of a list of gift tax loophole plugs previously proposed by the Treasury Department.
