Tax Alert: Action Required: $5 Million Lifetime Gift Tax Exclusion May Be Ending
11/10/2011
Over the course of the year we have distributed numerous tax alerts to bring to your attention what we believe might be once-in-a-lifetime gifting opportunities that exist for the calendar years 2011 and 2012.
In 2010 legislation that caught virtually every estate planning professional by surprise, Congress increased the Federal gift and estate tax exclusions to $5 million for transfers made between January 1, 2011 and December 31, 2012, and for the estates of decedents dying before December 31, 2012. Accordingly, for 2011 and 2012, an individual can make tax-free gifts of up to $5 million per person ($10 million for a married couple). The exclusion is scheduled to revert to $1 million on January 1, 2013.
For the last few weeks, however, it has been rumored that Congress could act, before Thanksgiving, to reduce the lifetime gifting exclusion back to only $1 million. This is because the Congressional “super committee,” created earlier this year to address the Federal government’s budget crisis, recently provided preliminary indications of some of its considerations, including the reversion of the lifetime gift tax exclusion to $1 million as of November 23, 2011.
Some of you have already taken advantage of this gifting opportunity. Others have been reluctant to do so, based on the political atmosphere and the ability to wait until later in 2012. It is critical to note that further procrastination, even if justified by valid income tax planning, jeopardizes the full benefit of what may turn out to be a very temporary $5 million lifetime gift tax exclusion.
Clients who are considering utilizing their current $5 million gifting exclusion need to understand that there is a chance (we cannot even speculate on any percentage of likelihood) that Congress could act somewhat imminently to reduce the lifetime exclusion. We are not comfortable with a “wait and see” attitude and would not want our clients to miss out on this potentially diminishing opportunity.
To determine if there is a reasonable possibility of implementing any planning strategies into your own estate plan prior to the possible November 23 action date, please contact Ira Herman, CPA, partner and Trust and Estate Practice director, at iherman@jhcohn.com or 973-618-6245, or your J.H. Cohn engagement partner at 877-704-3500.
About J.H. Cohn’s Trust and Estate Planning Practice: J.H. Cohn’s Trust and Estate Planning Practice provides a broad range of services and expertise to assist clients in all aspects of trust and estate planning, including the design, implementation, and ongoing administration of individualized plans aimed at minimizing the impact of gift, estate, and generation-skipping taxes. These plans often incorporate sophisticated strategies to achieve asset protection, business succession, wealth transfer, and wealth preservation goals. The Firm’s specialized planning services include asset protection, business succession, charitable gift giving, estate and trust planning, and tax minimization strategies, as well as a broad spectrum of services aimed at assisting clients in all aspects of trust and estate administration, including litigation support for trust and estate matters, post-mortem planning, preparation of fiduciary accountings, tax return, and valuation of closely held business interests.
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This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and J.H. Cohn LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.