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Throughout the past year, there have been many discussions and numerous proposals released for review regarding potentially changing current Federal tax law. Recently, the House Ways and Means committee¹ submitted a proposal that clarifies some of the content. The proposal submitted by the committee is still subject to change at any time but it gives us some indication as to what the final tax law may look like.
A new tax law means you might need to make some changes to your current estate planning documents. Some of the provisions put forth in the new proposal are set to take effect upon enactment should the bill be passed into law.
What can you do? Take action – review your situation and sit down with our attorneys to determine how these new laws may affect you and how you can stay protected for your future.
Here a few key points most relevant to estate planning:
- The new proposal includes a reduction to the federal estate tax exemption from $11.7M back down to the 2010 level of $5M per individual, adjusted to inflation
- With the new plan, any transfers to a “Grantor” trust that are designed to exclude assets from an estate at the time of death for tax purposes, would be included in the grantor’s taxable estate. Additionally, any “sales” to a grantor trust would trigger a capital gain that may have a dramatic effect on traditional estate tax freezing techniques.
- Also included is a provision that would remove valuation discounts for transfer tax purposes for ‘passive assets’ held for the production of income and not used in any active trades or businesses.
- Mega IRAs in the area of $10M and over will have limitations on Roth Conversions as well as required minimum distributions.
- The highest federal income tax bracket will go back to 39.6% and there will be an increase of 25% for capital gain rates for high income individuals.
Missing from this bill, however, is the current administration’s proposal to get rid of step-up in basis on death and the realization of a capital gains tax on an inherited property.
We have already seen discussions for further clarification of the committee’s proposal. Though all of the provisions are subject to change, we have a better understanding of the updates we might see in the upcoming tax law.
These changes will affect you sooner than you think. In order to take advantage of the techniques used for estate planning over the past several decades, now is the time to call and schedule a consultation.
It could be only a matter of weeks before the new bill is passed. Act now to make sure these changes don’t affect your estate.
Already have an estate plan? Schedule a meeting with our attorneys to review your documents and make sure everything is up to date and in order. Don’t have an estate plan? Schedule a meeting with one of our attorneys to get your estate planning started.
