At a time when the US tax authorities are tightening their regulatory grip, Americans worldwide have a brief chance to use relatively light rates before the end of 2012, when higher rates may kick in, says Withers, the international law firm.

Under the terms of the 2010 Tax Relief Act, a person who is a citizen of or domiciled in the US can give or transfer assets up to $5.12 million free of federal transfer tax to family members or trusts. A married US couple can pass up to $10.24 million, with gifts in excess of this amount taxed at the current low 35 per cent federal transfer tax rate, Withers explained.

However, the window of opportunity for this gift tax exemption closes on December 31 - and will be replaced by a flat $1 million gift tax exemption and 55 per cent federal transfer tax rate unless Congress passes a new law, Withers said in a briefing note.

Issues such as tax on bequests and inheritance have already come under the spotlight during the US presidential campaign, in which the state of the economy, public debt and tax system have all featured as issues.

Living abroad

Many of the 190,000 US American citizens living in the UK, for example, will be able to use this opportunity but must act fast.

“This really is a fantastic opportunity and one that should be grasped with both hands. For the next three months, US citizens and those domiciled in the US can gift significant assets - whether cash, property, businesses or even art and other non-traditional assets - free of US tax,” said Penelope Williams, partner.

“The situation is slightly more complex for Americans living in the UK because UK tax rules have to be considered. For example, while a trust will save US federal transfer taxes, it could trigger a large UK inheritance tax charge if created by someone domiciled or deemed domiciled in the UK. Similarly, gifts of appreciated assets can trigger UK capital gains tax, so care is needed,” she said.

Williams outlined eight tips for US citizens in the UK:

1. Consider Family Limited Partnerships;

2. Outright gifts for those who do not need to worry about additional control;

3. Cancel loans or other receivables from family members;

4. If a person plans to give up US citizenship - use the gift tax exemption to minimize exit tax liabilities;

5. Create an excluded property trust as an asset preservation vehicle;

6. Use the benefits of being in a couple;

7. If using US funds to buy a non-US home, gift the money or consider an inter-spousal loan;

8. Rebase asset values ahead of US profit and capital gains tax rate changes.

The advice comes at a time when expat Americans and the financial institutions that serve them are coming under more onerous compliance rules under the FATCA Act (Foreign Account Tax Account Compliance Act), designed to stamp out tax evasion.