Between now and December 31, 2012, during life or death, you can give away up to $5 million per person or $10 million per couple without paying tax. In 2013, the gift and estate tax rules are changing and are going back to what we had before, possibly a $1 million exemption, says Robert Wood, tax attorney with Wood, LLP in San Francisco.
Wood says it makes economic sense to do the tax efficient thing and give away the $5 million in real estate to your children but he questions if the $5 million exemption might not be available next year also. On any gift tax, it doesn't have to be absolute, Wood notes, adding that it can be done in trust so your children don't squander the money.
Along with most people, Wood thinks it is unlikely that the $5 million exemption will stick because it is tough for democrats to allow for such a high amount and that it is more likely to be $3.5 million. There is also the argument that the gift tax amount should be lower than the estate tax, says Wood.
The bottom line, according to Wood, is people should be thinking about it and talking with their estate planners, so "they can have an informed dialogue before the end of the year."
Attorney Robert Wood, of Wood, LLP in San Francisco is a featured commentator with The Tax Law Channel, part of The Legal Broadcast Network and more information on his Forbes.com article about gift and estate taxes can be found here.