There has been much hand-wringing over the "fiscal cliff" in the media lately, but very little about what protective measures citizens can take should we end up diving off the cliff head-first. For those of us who are not ready to repatriate it's time to have some open, honest conversation about what the cliff really means.

The cliff we face is so coined because it is the drop-off point at which a powerful combination of the expiration of the Bush tax cuts plus a series of deep automatic spending cuts to social programs and the defense budget will take place if Congress fails, once again, to come up with a better solution.

The latter consequence was enacted in 2011 after the failure of the 111th Congress to pass a federal budget and therefore stands as a compromise to resolve the dispute concerning the public debt ceiling. Essentially, Congress has a simple choice: come up with a workable solution to the deficit and budget crisis or the fiscal cliff will roll in and increase taxes while hacking away at spending with no regard to the consequences. As is their modus operandi, Congress has left difficult policy-making to the final hour. So what will happen to the average Orange County citizen if their procrastination leads us over the cliff?

According to the Congressional Budget office, the tax and spending cuts will almost inevitably contract the economy by -0.5%. This contraction has been hyperbolically compared to Greece's economic troubles. Our scenario would be unlikely to reach these lows, but it may indeed cause a second recession to which few will be immune. In turn, this will continue the cycle of fear that has prevented most average investors from participating in the markets' recent upturn.

Tax consequences of the cliff will likely affect O.C. residents the most. Most talk lately has focused on the Alternative Minimum Tax capital gains hikes — and they certainly should be publicized as they will affect most U.S. citizens.

However, the change in estate and gift taxes has been largely overlooked. Should Congress fail to come up with a solution, gift and estate tax exemptions will drop from $5.12 million per person with a tax of 35% on the excess to $1 million per person with a tax of 55% on the excess.

According to CNN Money, the median Newport Beach home is valued at $1.3 million — this alone would expose many O.C. residents to severe tax penalties. Moreover, regardless of whether or not we do go over the cliff, it is highly unlikely that the current estate tax exemptions will be sustainable for the long run as they are the most lenient they have been since the tax was enacted in 1916.

The very simple answer to this particular aspect of the fiscal cliff is to act quickly while Congress deliberates. The following are some things for you to consider acting upon in order to lessen the effects of the fiscal cliff on your personal household.

First, liquidate capital gain assets before year-end to take advantage of the current low capital gain tax rates. Since you will realize a step up in basis you can reinvest in various financial instruments exposing only the future growth to higher capital gain taxes.

Second, it appears inevitable that ordinary income taxes will increase, due to the current status of our country's economy. We feel you should take as much ordinary income as possible before year end again to take advantage of current low-income tax rates.

Last, and probably most important for O.C. residents, transfer as much of the current $5.12 million estate and gift tax exemption as possible to heirs either directly or in trust. After the transfer you can decide whether to invest, buy life insurance, annuities, etc. But, the transfer needs to happen prior to Dec. 31.

For example, on a $10-million estate, if you do not act prior to Dec. 31 you risk exposing up to $8 million of assets to a potential 55% tax, which could result in a loss of as much as $4.4 million.

These are trying times to say the least, but your estate and financial planning advisors can guide you through these choppy waters. Regardless of whom you use as counsel or what estate planning techniques you use, act and act now — Jan. 1 is coming like a freight train.

J. BRIAN W. HORN is chairman and CEO of Newport Financial Group Inc.