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Discussions of the looming fiscal cliff have paid scant attention to estate and gift taxes. But wealthy people might do well to consider being very generous this month and giving very large gifts at today's bargain tax prices.

While the estate and gift tax has been in flux for the past decade, only its most recent uncertainty has forced the wealthiest to address their financial fate. A recent Forbes article, < href="Give Now or Pay Later: Rich Face Dilemma With Fate Of Estate And Gift Taxes Up In Air"target="_blank">, discusses, in plain language, the consequences of giving now or waiting.

Basically, the current estate and gift tax exempts $5 million of gifts or bequests and taxes any excess at 35 percent. And unless Congress takes action, on January 1, the tax will return to a $1 million exemption with the excess taxed at 55 percent. Accordingly, the wealthy may want to consider giving large gifts before the end of the year.

However, proceed with caution. If you are gifting assets to your nephew that have appreciated in value, your gift comes with your basis - the amount you paid for the asset. If your nephew sells the asset, he will owe tax on both your capital gain and any appreciation after the gift. If your nephew inherits the asset, however, he will only owe capital gains tax on the gains that occur after inheriting the assets.

The undetermined fate of the federal estate and gift taxes has the potential to cause the wealthy to make ill-advised gifts. To avoid making one of these ill-advised gifts, and potentially costing you or your loved ones millions of dollars, consult with your estate planning attorney in advance.

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