With the Super Committee in a deadlock over its tremendous task, the rumor mill is alive and well. What do those with their ears to the ground hear coming? It might be that our gift tax exemptions are in the “crosshairs.” The most recent source of the rumor has come from none other than Peter Reilly at Forbes, who is himself referencing Dean Mead’s blog. In its search for a solution to close the budget gap, the Super Committee might whack our new Gift Tax exemption from $5 million all the way down to $1 million. Not only that, but there is reason to fear that it will have an effective date of November 23, 2011! That may be the case and maybe it won’t be. After all, the rushed budget deal last December did include a retroactive estate tax law, but it also gave people the choice to use the 2010 law or the retroactive one. Accordingly, we might expect such a concession even if an effective date of November 23, 2011, has been posted. Nevertheless, this concern over the gift tax exemption has been growing for awhile and it may be a genuine concern after all. Why? The budget must be approved by Congress before Christmas and, as a result, the 2012 exemptions are still very much on the table. So, even if you’re one who waits for the facts before making your moves, consider making your gifting moves ASAP. If you’ve been putting off some estate planning moves until 2012 (thinking you’d still have that $5 million gift exemption amount), then you might find yourself shut out from those plans. Remember: Tax law rewards the diligent. Even if you’ve been pretty active in implementing your estate plan this year, you might have done so on the basis of next year. The question to ask yourself, then, is what this might mean to you? Society at large is in the hands of Congress (and its authority to tax), but it’s not yet clear where they’re taking us.
Reference: Forbes (November 9, 2011) “Reduction in Gift Tax Exclusion May Have A November 23 Effective Date”