Originally Published on forbes.com on November 9th, 2011
______________________________________
Subsequent inquiry has made me a little more skeptical about these reports. Here is a follow-up.
Rumours are circulating that the Super Committee may be planning to cut Gift Tax Exemptions from $5,000,000 to $1,000,000. The really scary part of the rumors is that the change may have an effective date of November 23, 2011. How real are the rumours ? Well consider the sources. This is from the Florida Trusts and Estates Blog of Dean Mead
The Joint Select Committee on Deficit Reduction (the “Super Committee”), a 12 member bipartisan Congressional committee, is scheduled to announce its proposals on November 23rd for reducing the national deficit by at least $1.5 trillion over the next 10 years. The Super Committee proposals may include changes to the current estate, gift and generation-skipping transfer tax laws. Of immediate importance to you or your clients, we have heard rumors that the Super Committee may propose a reduction in the Federal gift tax exemption from the current $5 million exemption to $1 million. It is possible that the Super Committee may recommend these changes to become effective as early as November 23, 2011.
My friend Charley Egerton is a partner in Dean Mead, a major Orlando firm. He recently completed a term as the American Bar Association’s Section of Taxation. That is significant credibility. I tried to reach Matthew Ahearn, the author of the post, but everybody there is in a meeting. Here is another source for the rumour.
What to Do ?
Making a major wealth transfer gift in a time frame of not much more than a week is fraught with peril. Select some assets. Value them. Contribute them to a family limited partnership. Operate the partnership for a while. Value the partnership interests. Make gifts of the partnership interest. This is not going to happen in a week. What you can do though is make a gift of cash or marketable securities to an intentionally defective grantor trust. Then you can select assets that have better wealth transfer attributes and sell them to the trust in a more orderly manner.