Although we are hearing a lot about the nearing sunset of current income tax rates, especially in light of the upcoming presidential election, we are not hearing much about another tax that is slated to revert to 2001 levels at the end of the year — the estate tax. Over the past decade, taxpayers have enjoyed increased exemption amounts, reduced tax rates, and most recently, portability — the ability to transfer unused exemption amounts to a surviving spouse. As of January 1, 2013, all of those increasing advantages since 2001 will be stripped away unless new federal legislation is passed. Although experts disagree about what may happen after 2012, one thing is certain: Taxpayers have a little more than three months left under the current estate tax laws, and you may want to consider taking advantage of them.

Under current estate tax laws, every person can transfer up to $5.12 million during life or at death, gift- and estate- tax free. As of January 1, 2013, that amount is scheduled to revert to $1 million. In addition, the highest current estate tax rate is 35 percent, but that rate will go back up to 55 percent at the end of the year. Portability is also slated to disappear.

If you are fortunate enough to have the wealth to make a gift and are comfortable that you will have enough remaining assets to last through the rest of your life, may want to take advantage of a once-in-a-lifetime opportunity to pass substantial wealth to your heirs at a reduced tax cost. If the exemption amount falls back to $1 million and rates rise to 55 percent, then a lifetime gift you make to your heirs by the end of the year of up to $5.12 million could save a substantial amount of your wealth from estate taxes. More than $2 million in taxes to be exact.

If you make a gift in excess of the annual gift tax exclusion limit of $13,000 per year ($26,000 per couple), you are using up all or a part of your exemption that can be used at the time of death, so you are required to report the gift by filing a gift tax return with the IRS. Be aware that if you make a $1 million gift and the exemption falls to $1 million, all you have done is use up your exemption during your lifetime; therefore, you have done little to minimize estate taxes other than minimize taxes on any future appreciation in the property you gifted. It is with gifts between $1 million and $5.12 million that could potentially reap substantial estate tax savings in the future.

Keep in mind that if you make a $5.12 million gift and the exemption level remains at $5.12 million or increase, you may have accomplished nothing but keep future appreciation of gifted assets out of your estate. The potential benefits are so substantial, however, that you should at least consider whether making a gift before the end of the year is right for you.