For 2012, the gift and estate tax exemption is $5.12 million and the maximum gift and estate tax rate is 35%. Absent additional legislation, for 2013 the exemption will drop to $1 million and the top tax rate will increase to 55%. It’s difficult to predict what Congress will do between now and then, so consider making large gifts before year end to take advantage of the high exemption amount.

Even if Congress extends the current law, there are advantages to making gifts early, especially gifts of assets expected to appreciate. That’s because future appreciation is removed from your estate and sheltered from gift and estate taxes.

A caveat: If the exemption does fall back to $1 million in 2013, the IRS might attempt to “claw back” previous gifts in excess of $1 million and subject them to estate tax, even though they were exempt from gift taxes when made. Most experts believe this outcome is unlikely, but if it happens, you’ll be no worse off for having made the gift, and you may be better off if the assets appreciate after the gift is made.