Proposed Changes to Estate Tax

Recent information regarding the proposed tax changes by the Biden Administration includes a proposal to reduce the federal estate and GST tax exemption from $11,700,000 per individual to the 2009 level of $3,500,000 per individual.  There is even a proposal to reduce the federal gift tax exemption to $1,000,000 per individual.

The Biden Administration also proposed to increase gift, estate and GST tax rates from 40% to 45%.  If that is not enough, they proposed to eliminate the “step-up” in bases for inherited assets exceeding $100,000 (excluding surviving spouses and charities).

The lifetime gift pendulum has swung from $600,000 per individual in 1997 to $11,700,000 in 2021 and the amount has changed every year.  At a minimum, if no changes are made to the current laws, the exemption will decrease to $5,000,000 in 2026.    

An even bigger concern is that these drastic proposed changes may apply retroactively, similar to what occurred with the Bill Clinton Omnibus Budget Reconciliation Act of 1993, which was signed into law in August of 1993 but applied provisions such as an increase gift and estate tax rate retroactively to January 1, 1993.  

Given the current circumstances, now is the time to contact our office to discuss possible effects of the proposed tax changes on your estate and options for succession planning. 

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