Coleman Issues Estate Planning Alert: Gift Tax Window of Opportunity Narrows


The recent elections have resulted in essentially no change to the balance of power in the national government. As a consequence, it is now more difficult than ever to predict the future direction of estate and gift tax law. However, as things stand now, a valuable gift tax window of opportunity will close at the end of 2012.

The 2012 gift tax exclusion amount, which is the cumulative amount of gifts that can be made without a gift tax, equals $5,120,000 per individual ($10,240,000 per couple). A similar exclusion for generation skipping tax also applies in 2012.

The President's proposed 2013 budget calls for the reduction of the gift tax exclusion amount to $1,000,000 next year. If no further legislative action is taken, beginning in 2013 the gift tax exclusion amount will reduce to $1,000,000 by default. While it is possible that the lame duck Congress and the President will reach an agreement extending the current exclusion amounts or permanently setting them at similar levels, it is becoming increasingly unlikely that anything as valuable as the current level exclusion amounts will be available after this year.

Thus, the window is closing fast on the opportunity to make use of the expanded gift and generation skipping tax exclusion amounts to transfer assets of significant value without a transfer tax.

The President's 2013 budget also calls for several transfer tax "reforms" that could significantly reduce the benefits of lifetime giving, among which are the elimination of discounts on intra-family transfers, the requirement of a minimum duration for certain tax advantaged trusts, and the application of consistent rules for the ownership of trusts for income and transfer tax purposes.

Accordingly, the opportunity to utilize common estate planning techniques, such as grantor retained annuity trusts, private annuities, family LLCs, and sales to intentionally defective grantor trusts may not be as widely available after tax reform measures are enacted as part of the budget process.

To take advantage of these techniques, gifts may have to be made before Congress acts and certainly before the end of 2012.

For further information, please contact J. Grant Coleman at 504.569.1637 or

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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