Potential Immediate Changes to Gift Tax Exemptions
The Joint Select Committee on Deficit Reduction (the "Super Committee") is scheduled to issue a formal recommendation on how to reduce the national deficit over the next ten years. The Super Committee is set to announce its proposal on November 23, 2011. There has been speculation that the Super Committee may recommend a reduction in the current estate, gift and generation-skipping transfer tax exemptions, which exemptions under current governing law are $5 million per person for 2011 and 2012, and are scheduled to revert back to $1 million in 2013.
It is speculated that the Super Committee may recommend that these exemptions revert back to $1 million as early as November 23, 2011.
There may also be other proposals which would have additional effects on the current estate, gift, and generation-skipping transfer tax rules, such as the elimination of valuation discounts (for lack of control, marketability, etc.) for varied entity interests and the elimination of the short- term "zeroed-out" grantor retained annuity trust (i.e. "GRAT").
It is impossible to tell whether there is any truth to these speculations, but we wanted to make you aware of what is currently taking place which may have an effect on your overall estate planning strategy. While it is generally not a good idea to do planning in haste, you should continue to monitor this situation and consider the options available to you in this short timeframe, whether such involves gifting to existing trusts or creating new entities. You should also consider which assets you may have that are easily transferable.
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