Estate Tax Uncertainty Returns as We Approach Year-End
As Congress continues to look for ways to reduce the deficit and the Joint Select Committee on Deficit Reduction (the Super Committee) sees its deadline of November 23, 2011 looming, speculation has been rampant regarding possible imminent changes to the estate and gift tax laws. Rumors are that the Super Committee could recommend reducing the current $5 million lifetime gift tax exemption to the $1 million exemption that applied prior to the changes made by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the 2010 Act). The Super Committee must vote on its recommendations and send the legislative language to the Senate and the House of Representatives by November 23. The House and Senate are required to vote on the Super Committee’s recommendations by December 23, 2011.
The Super Committee is working to finalize its recommendations for a deficit reduction plan, and the possibility of a reduction in the exemption amount cannot be entirely ruled out. Over the past two months, most of the Super Committee’s work has been behind closed doors so much of the news is speculation and prediction, however, the Obama Administration remains opposed to tax reductions benefiting high income taxpayers and supports the return of the estate tax exemption to 2009 levels.
All of the talk about this possible reduction in the gift tax exemption has some advisors suggesting that taxpayers consider completing major gifts before the end of 2011, possibly prior to November 23, 2011, to ensure use of the $5 million exemption. While there is significant uncertainty regarding the final outcome, and current concerns stem from Capitol Hill “chatter,” individuals considering a major gift before the end of 2011 may want to consider accelerating the gift and making it before November 23, 2011, to avoid the possibility that the $5 million exemption is reduced as part of the current deficit reduction negotiation process.
