As we have written in previous ebulletins, the current federal gift, estate and generation skipping tax (GST) exemptions are $5 million. These amounts previously have been much lower: $1 million for gift tax and $3.5 million for the estate and GST taxes.
There have been rumors—and “rumors” seems to be the only way to describe what is happening in the tax world these days—that the Congressional "super-committee" is contemplating a change to these exemptions. One possibility is a return to the 2009 exemptions, which were $1 million for the gift tax exemption and $3.5 million for the estate and GST exemptions. It is possible that these reduced exemptions could become effective prior to the "super committee" deadline of November 23.
Individuals considering making a gift using the current $5 million gift and GST exemptions, or any amount above the possibly resurrected $1 million, could lose that opportunity if the gift isn't made before the effective date of new legislation.
For those individuals who are interested in making a substantial gift, the next couple of weeks could be critical. We do not know what will happen in the "super committee" or in Congress, but we wanted to inform you that the window of time to make large gifts, and to “skip” estates by making gifts to grandchildren, might close sooner than expected.