Haynes and Boone's Newsroom

Rumor Has It: Speculation on Changes to Federal Gift Tax Exemptions
11/15/2011
Rice M. Tilley, Jr., John M. Collins, William D. Ratliff, III, J. Mitchell Miller, Jeffrey E. Raley, Danika Hudik Mendrygal, Rebecca E. Whitacre

The Congressional Super Committee (the Joint Select Committee on Deficit Reduction) continues to meet in Washington, D.C., with the goal of reducing the country’s deficit through program cuts and revenue increases. There have been several unsubstantiated rumors regarding proposed changes to the estate and gift tax laws. One online rumor sparked particular interest even though no source was mentioned. Any number of law firms, accountants, and wealth advisers have raised the alarm that the Super Committee is considering a major deal that includes a reduction in the federal gift tax exemption to $1 million, effective for all transfers after November 22. It is all just speculation.

The current gift tax exemption is $5 million. This exemption is scheduled to rise to $5.12 million on January 1, 2012, and it is currently scheduled to be reduced to $1 million on January 1, 2013. We have advised many of our clients who are interested in making substantial gifts to children or grandchildren (whether outright or in trust) to consider making those gifts this year or early next year, and we have advised other clients to wait until next fall to determine whether the current rules will be extended or are at risk of expiring and reverting to the 2001 exemption levels and tax rates.

If we hear of any credible substantiation of this November 22 rumor, we will send another alert to encourage our clients to accelerate any transactions they have pending. It is worth noting that Congress can pass a law that retroactively increases tax or reduces exemptions, and it can generally establish any effective date it wishes, so that there is no guarantee such a major deal would not have an effective date before November 23.

If you have any questions, please feel free to contact one of the attorneys listed below. You may also view the alert in the PDF linked below.

 PDF - Rumor_Federal_Gift_Tax_Exemptions.pdf

Rice M. Tilley, Jr.*
817.347.6611

John M. Collins
214.651.5564
713.547.2002

 

William D. Ratliff*
817.347.6608

J. Mitchell Miller
214.651.5363

 

Jeffrey E. Raley
713.547.2088

 

Danika H. Mendrygal
214.651.5757

 

Rebecca E. Whitacre
214.651.5112
 

 

To ensure compliance with requirements imposed by U.S. Treasury Regulations, Haynes and Boone, LLP informs you that any U.S. tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

*Board Certified – Estate Planning and Probate Law and Tax Law by the Texas Board of Legal Specialization.