Protect Your Legacy Before It’s Too Late

Anyone with an estate of $3.5 million or more should think about getting in line now to talk to an estate professional because offices everywhere are busy dealing with proposed changes to the estate and gift tax laws.

The recent tax bill, the 99.5% Act, aims to tax the wealthiest 0.5% of Americans — which if it becomes law would dramatically increase the tax cost to transfer your legacy to the next generation.

What’s in the 99.5% Act?

• It cuts the federal estate tax exemption amount from the current $11.7 million to $3.5 million. The good news is that the reduction would not occur until Jan. 1, 2022.

• The proposed bill reduces the gift tax allowance to only $1M. Gifts over that amount will be taxed by at least 45%.

The current maximum federal estate tax rate is 40%. The 95.5% Act proposes to increase the estate tax rate to 45% once a deceased person’s taxable estate exceeds $3.5M. The tax rate can reach 50% or higher when the amount subject to tax exceeds $10M, capping at 65% for estates over $1B. But

The recent tax bill, the 99.5% Act, aims to tax the wealthiest 0.5% of Americans — which if it becomes law would dramatically increase the tax cost to transfer your legacy to the next generation.

that increase would not apply until 2022.

In addition to the above exemption and tax changes, gifting of up to $15,000 per year per person would be limited to a total of $30,000 per donor per year, including gifts to irrevocable trusts or in certain “flow through entities” beginning in 2022.

Estate Strategies Could Change Drastically

Some of the primary tools and strategies we have successfully used in the past will not be available in the future. These changes would begin on the date President Biden signs the bill into law, if indeed this occurs. Once that happens, we would not be able to fund or have assets sold to Irrevocable Trusts that can be disregarded for income tax purposes. And we would not be able to use valuation discounts or Grantor Retained Annuity Trusts (GRATs) in most circumstances. However, those arrangements put into place before the new law is passed will be grandfathered, as long as they are not added to or altered after the law is passed, as presently written.

This is an important call to action for families having assets expected to exceed $3.5 million per person.

These individuals will need to take a serious look at their present planning situation to determine whether to take immediate steps to avoid death taxes.

Due to these anticipated possible changes, most estate and trust law firms have been exceedingly busy with estate tax planning since the middle of last year and are generally operating at capacity. If you wish to complete an estate tax plan or have put your estate planning off for far too long, now is the time to get yourself into queue and get this done, putting your plan into action before any new laws may pass.

Please contact our office to get your questions answered and to secure your assets before this bill passes.