• Reduce the unified estate, gift and Generation-Skipping Transfer (GST) exclusion amounts from the current $5,120,000 to $3,500,000 for estate and GST purposes and to $1,000,000 for gift tax purposes (effective 1/1/2013);
• Increase the top tax rate for estate, gift and GST to 45% from the current 35% (effective 1/1/2013);
• Impose a consistency in value requirement for transfer tax and income tax purposes (effective on date of enactment);
• Modify the rules on valuation discounts available under current law by further restricting the use of discounts in family-controlled entities (effective generally for transfers after date of enactment);
• Require a minimum 10 year term for Grantor Retained Annuity Trusts (GRATs) (effective for trusts created after enactment);
• Limiting the duration of the GST exemption (effective generally for trusts created after date of enactment);
• Require coordination of certain income and transfer tax rules applicable to grantor trusts (effective generally for trusts created after date of enactment); and
• Extend the estate tax lien period for estate tax deferral provided under Section 6166.

There still is a 10 month window for estate, gift and GST planning under the existing 2012 rules discussed below.  The current rules can provide significantly better planning opportunities than  either the President's proposals discussed above or the sunset provision discussed below.

Generous new estate and gift tax provisions are available only through the end of this year:

• Temporary two year provisions were enacted as part of the overall extension of the Bush tax cuts.
• Most significant provision was to reunify the estate, gift and generation-skipping tax (GST) exemptions and increase those exemptions to $5,000,000 ($10,000,000 for a married couple) while reducing the top transfer tax rate to 35%.
• The exemptions have been adjusted for inflation for 2012 to $5,120,000 ($10,240,000 for a married couple).
• Previously, the gift tax exemption was only $1,000,000.

Transfer Tax Rules will "sunset" effective December 31, 2012:

• This will happen automatically if Congress takes "no action" (a skill that they have honed into a fine art).

On January 1, 2013 the exemptions will revert to $1,000,000 and the top estate, gift and GST rate will go back up to 55%.

Please contact Ronald Marini or Robert Blumenfeld at (305) 374-4424 for further assistance.