It has started again. No, not the Christmas music and sales: - it seems the Holiday Blitz started right after Labor Day. I am talking about the rumors regarding Congress and the estate tax. Currently, wealthy individuals can transfer $5 million tax free ($10 million for a husband and wife). This $5 million gifting exemption is scheduled to terminate at the end of 2012, when the exemption amount drops to $1 million absent new law. However, the rumor mill is rampant regarding Congress reducing the $5 million gift exemption prior to 2012, meaning taxpayers only have until the end of this year to do their planning. A more disturbing rumor has the President and Congress reducing the $5 million exemption by November 23rd, at the urging of the Super Committee.
The moral of the story is that those who have the planning in progress should complete it, this week if possible. Those that have the planning in progress but are waiting on appraisals and further pre-conditions that make November 23 impossible, but December 31 plausible, should complete it prior to 2012. Beyond that, those who have asset transfers in mind but chose to wait until 2012, can only hope that the exemption amount and other transfer advantages, such as Dynasty Trusts, discounting of family assets and two year rolling GRATs, survive into 2012.
Further, perhaps in a sign of things to come, just last week Washington state Congressman, Jim McDermott, introduced a bill to reduce the gift and estate tax exemption to $1 million ($2 million for a married couple). We can expect much give and take regarding where the exemption amount ultimately ends up.