In August, the US Congress passed the Budget Control Act of 2011, which created the Joint Select Committee on Deficit Reduction. This committee has since come to be known as the “Super Committee” because of the perceived importance of the committee’s charge of issuing a recommendation for $1.5 trillion in deficit reductions over the next decade. The Super Committee’s recommendation is due on Wednesday, November 23, and will include both proposed spending cuts and tax increases.
How is the Super Committee related to Estate Planning? Because of the significant estate and gift tax decreases implemented in the tax law signed at the very end of 2010, there is plenty of speculation that some of the tax increases will come in the estate and gift tax areas. Rumors abound of a lowering of the lifetime gift tax exemption from the current $5
million to $1 million. Today, I even heard that there are also rumors of lowering the estate tax exemption from $5 million to $1 million, which is what the 2010 tax law prevented from happening in the first place. There are some guesses out there that those changes would take effect as soon as November 23, the date they are announced. However, few, if any, of the rumors have been confirmed as actual proposals by any of the members of the Super Committee, but the speculation is out there.
When the 2010 tax law increased the estate and gift tax exemption from $1 million to $5 million for 2011 and 2012, it impacted estate planning significantly because most people did not have to include tax planning in their estate plan. If the Super Committee decides to bring those numbers back down to $1 million, all of a sudden there are tens of thousands of people who must take a look at their estate plan to make sure they are
protected sufficiently so that a large portion of their estate doesn’t go to Uncle Sam when they pass away. Although everyone can speculate as to what will happen, only the Super Committee actually knows what ideas are being thrown around. That’s why I’ll be keeping an eye on their recommendation on Wednesday, so I can get it directly from the horse’s mouth.