NOVEMBER 7, 2011: Is the Super Committee going to take away my gift/estate tax exclusion?

The short answer is that we do not know for sure. One source states that this "may" happen. But, it does not seem that anyone can do anything but guess whether or not this will happen at this point in time. As we continue to learn more, I will update you with the facts.

What is very important NOW is the fact that existing gifting strategies provide for a great opportunity to reduce a person's tax burden. Why is this? Well, the reason is that the Federal gift tax exemption is currently at $5 million. (Remember, however, that CT is at $2MM, so being exempt from Federal doesn't necessarily mean you are exempt from Connecticut).

Thus, if a person wants to reduce their potential estate tax burden, and wants to provide for kids, grandkids, sisters, brothers, nieces, nephews, and other loved ones, during their lifetime, they can do so up to the exemption amount in their lifetime without paying a gift tax. If they take into account their annual exclusion, per donee, the amount gets even bigger.

So wouldn't anyone do this who has a taxable estate? The biggest concern we hear about these gifting strategies is that folks don't necessarily want to give up outright control. Many people have loved ones who could use the help, but those loved ones probably aren't in the best position to take a lump sum, and it may be that the donor is concerned that they will need the income during their lifetime. Estate and Gift planning strategies can avoid these problems by r educing the tax liability AND providing income to the gift-giver for a pre-determined period of time.

Of course if the rules change on us, these opportunities could be gone. The Super Committee is expected to propose a Bill outlining any changes on November 23, 2011. If you are considering doing some gifting at this point in time, it is probably a good opportunity to have those discussions with your financial advisor and Estate Planning Attorney sooner than later. If you want to talk with a Connecticut estate planning attorney now , click here for the contact information.

Categories: Gifting, Taxes