As we have indicated in prior Newsletters, there are two primary exemptions from gift and estate tax. One, the "lifetime exemption," allows you to pass on to your children, either during lifetime or through your estate, up to $600,000 in value without tax. With properly drafted Wills, this exemption may be doubled for a married couple. The second sort of exemption is the "annual exclusion," which allows you to give up to $10,000 per year to any person tax-free. Again, for a married couple this amount may be doubled. These two exemptions are complementary so that, for instance, annual gifts of $10,000 to children do not use any of the $600,000 lifetime exemption.

We are sorry to report that these exemptions are in some jeopardy. There have been proposals in Congress to reduce the lifetime exemption from $600,000 to $200,000. There have also been proposals to limit the number of annual exclusions one may use. Neither of these proposals has succeeded in Congress, but the reduction of these exemptions remains a possibility.

What can one do about this? One can always write one's representatives in Congress; the proposal to reduce the lifetime exemption was stalled, at least in part, by an outcry from voters. One might also consider taking full advantage of these exemptions while they are available. We have a number of clients who are considering larger-than-usual gifts to children this year. Some of these gifts will be made to children directly, and some in trust. There are a number of ways to take advantage of the exemptions.

If you would like to explore the possibility of making gifts to save taxes, please call the lawyer with whom you work, Larry Ghilarducci, Eileen Peterson, Al Falk or Alan Macpherson of our Tacoma office, or Larry Brown of our Seattle office.

Best wishes for a happy holiday season.