Actions to consider before December 31, 2012 (subject to consultation with your advisors and potential Congressional action):
- Make year end gifts
- Accelerate income
- Defer deductions
- Review will and estate planning documents in light of pending changes
The 2010 Legislation by its own terms was only applicable for the years 2010 through 2012. As you know, Congress is currently deadlocked over proposed tax modifications. If Congress fails to extend the 2010 Legislation, on January 1, 2013, the federal estate and gift tax exemptions will drop from $5.12 million to $1.0 million, the GST tax exemption will drop from $5.12 million to $1.39 million, plus an adjustment for 2012 inflation. Moreover, the top marginal rate of estate, gift and GST tax will return to 55% from the current 35% rate.
As we noted in our client alert on December 9, 2011, under the Temporary Legislation, now is an exceptionally good time to make gift transfers. This extremely favorable conflation of favorable interest rates, liberalized wealth transfer tax exemptions and low rates will end on December 31, 2012, unless Congress does something.
Accordingly, we remind you again that if you have any inclination whatsoever to make substantial gifts as part of your estate planning, the current window of opportunity represents an unparalleled opportunity to do so. This is particularly important for couples with combined worth in excess of $10 million dollars or individuals with net worth in excess of $5 million. Please contact us as soon as possible if you wish to implement any such transactions prior to the end of 2012.
If we can assist with any of your year-end tax or business planning to address this changing environment, please do not hesitate to contact your regular attorney here at Morris, Manning & Martin or any member of our Tax Practice.