AICPA Asks Congress to Prevent Turmoil for Inter-Generation Gifts

January 9, 2012

AICPA Asks Congress to Prevent Turmoil for Inter-Generation Gifts

Uncertainty is no stranger to the estate planning world.   For example, clients and practitioners did not know until Dec. 17, 2010, whether estates of decedents who died that year would or would not be subject to the estate tax and if so, to what extent. 

The AICPA is urging Congress to head off additional uncertainty by permanently extending technical changes to the generation skipping transfer (GST) rules, maintaining a uniform exclusion amount for estate, gift, and GST taxes, and adopting several other provisions by the end of 2012. 

In a letter to the chairs and ranking members of the congressional tax committees on Nov. 18, 2011, Patricia Thompson, CPA, chair of the AICPA Tax Executive Committee, proposed that Congress:  

1) Make permanent the technical modifications to the GST rules that were enacted in 2001 and extended in 2010 that provide relief to taxpayers and practitioners regarding allocations of the GST exemption.

2) Maintain an applicable exclusion amount that is indexed for inflation.

3) Maintain a uniform exclusion amount for estate, gift and generation-skipping transfer taxes to simplify planning for individuals.

4) Maintain portability of the estate tax exemption to a surviving spouse to ease estate planning and administration for married couples.

5) Reinstate the full state estate or death tax credit or some other mechanism that would allow states to uniformly “piggyback” on the federal estate tax, which would reduce complexity of the current system in which some states impose their own estate tax regime.

6) Provide several tax brackets to avoid "cliff" taxation in which taxpayers of similar wealth are subject to dramatically different tax rates.

“The uncertainty of the tax law impedes proper estate planning for taxpayers, and the necessity to revise estate planning documents multiple times places an undue burden on taxpayers and their advisors,” Thompson said.  “In addition, if no congressional action is taken, on Jan. 1, 2013, the 2001 legislation will sunset, which will create turmoil for gifts to multigenerational trusts to which GST exemption was allocated between 2001 and 2012.”

For further information, read the AICPA Insight blog Death and Taxes, Not Quite as Certain as You Think by Eileen Sherr, CPA, MST, AICPA Senior Technical Manager – Taxation.