As you may recall from our prior communications, on December 17,
2010, The Tax Relief, Unemployment Insurance Reauthorization and
Job Creation Act of 2010 (the "2010 Act") was signed into law by
President Obama. The 2010 Act extended the sunset of the
Economic Growth and Tax Relief Reconciliation Act of 2001
("EGTRRA") for 2 years and made significant changes to the estate,
gift and generation-skipping transfer tax laws. The legislation
provided, in part, that for 2011 and 2012, the total lifetime gift tax and
generation-skipping transfer tax exemptions increased from
$1,000,000 to $5,000,000. Unless Congress acts to extend the
provision, the exemptions will return to $1,000,000 (indexed for
inflation) with a 55% tax rate as of January 1, 2013.

While you may still have more than one year to take advantage of the
new gift tax exemption, we do not necessarily recommend waiting
until the last minute to take advantage of your increased exemption
for a number of reasons. In particular, once a gift is made, the gifted
property plus any appreciation will escape future transfer taxes.
Moreover, we are also concerned that future legislation could limit
your opportunity to utilize the increased exemption in the most
beneficial manner. In fact, on August 2, 2011, the Budget Control Act
of 2011 was signed into law. The Act calls for a new Joint Committee
to consider year-end tax legislation. The proposed changes that have
been discussed in the past, and that are likely to be discussed again,
include (i) eliminating discounts for partnerships and other closely
held businesses; (ii) prohibiting short term Grantor Retained Annuity
Trusts ("GRATs"); and (iii) limiting the benefits of long term dynasty
trusts, to name a few. Given the current budget crisis, it is also
conceivable that the Committee will recommend a reduction in the
exemption amount prior to 2013. For those in a position to do so, we
strongly recommend that you take advantage of your gift tax planning
opportunities sooner rather than later.