Since the passage of the Budget Control Act of 2011 (the Budget Act), there has been speculation in the estate planning community that the “Supercommittee” established by the Budget Act would achieve some of its mandated deficit reduction by recommending an early reduction of the $5 Million credit against gift and estate tax and the $5 Million exemption from generation-skipping transfer tax that, under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the 2010 Act), were not scheduled to be reduced until January 1, 2013. As the November 23 deadline for the Supercommittee’s recommendations to Congress draws near, this speculation has dramatically increased. Because of the possibility that a reduction in the credit amount could be effective as early as November 23, some advisors are suggesting that clients who have been considering making significant gifts complete these gifts before November 23.

The makeup of the Supercommittee, the politics of the gift and estate tax and the fact that the increased $5 Million credit was negotiated fewer than 12 months ago suggest that an immediate reduction of the credit is not likely to win the approval of a majority of the bi-partisan committee. However, there will be no certainty on this issue until it may be too late to take advantage of the $5 Million credit currently in effect...