Possible Changes to the Estate and Gift Tax

I previously blogged that many speculate the Super Committee will recommend that Congress reduce the deficit by decreasing the estate and gift tax thresholds to 2009 levels. This means the estate tax exclusion would increase by $120,000 in 2012. Many also expect the Committee will recommend that Congress make changes to other estate planning strategies like GRATS and family transfer discounts for 2012.

According to a recent IRS statement, standard deduction and personal exemptions also are expected to increase for 2012 and the tax brackets will likely widen. Various tax provisions are set to increase in 2012, including the standard deduction rate, the taxable-income threshold, the estate tax amount, the foreign earned income deduction, and the annual deductible amounts for Medical Savings Accounts.

The Super Committee will issue a formal, bipartisan recommendation on how to reduce the deficit the day before Thanksgiving, and Congress will have until December 23, 2011 to vote on the proposed bill. The vote is pure majority, and if Congress does not agree on the bill, automatic spending cuts will begin.

See Michael Fischer, Estate Tax Exclusion to Rise: IRS Inflation Adjustment for 2012, AdvisoreOne, October 26, 2011; Handler Thayer, LLP Tax Alert: LEGISLATIVE RISK – The Super Committee Warrants Immediate Consideration of Your Long Term and Short Term Estate Planning by Year End, The Wall Street Journal, Oct. 27, 2011.