Rumors have begun to circulate among tax and financial advisors about a possible early reduction of the $5 million estate, gift, and generation-skipping transfer tax exemption. The exemption is currently set at $5 million through December 31, 2012, after which it will revert to $1 million barring further congressional action. E-mails have begun to circulate among advisors that the Joint Select Committee on Deficit Reduction of Congress ("Super Committee") may recommend reducing the exemption to $1 million as early as November 23, 2011; the date the Super Committee's report to Congress is due. Alternatively, the exemption could be reduced as of January 1, 2012.
In addition to cutting spending by $1.2 trillion over the next 10 years, the Budget Control Act of 2011 charged the Super Committee with finding an additional $1.5 trillion in savings over that period. An early reduction of the estate, gift, and generation-skipping transfer tax exemption is rumored to be one of the possible revenue-raising provisions the Super Committee is considering. Other rumored changes include a return to higher estate, gift, and generation-skipping transfer tax rates, imposing minimum terms on grantor-retained annuity trusts, and limiting or eliminating valuation discounts for minority interests in entities.
While some advisors are recommending that clients accelerate contemplated gifts to a date prior to November 23, 2011, even those reporting these rumors acknowledge that these are only possibilities, and they have no way to know what changes ultimately will be reported or passed. Although some lobbyists are reporting that Republicans may offer some "loophole closers," it appears doubtful that these would include estate and gift taxes. For now, we do not feel any of these changes are likely, but cannot predict for certain what may occur.
If you decide you wish to take advantage of the $5 million gift tax exemption and want to avoid even a small risk of an early reduction of the exemption amount, please contact your attorney in our group immediately to discuss the possibility of completing your contemplated gift prior to November 23, 2011.
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