Hyden, Miron & Foster, PLLC Law Blog

Monday, July 26, 2021

Estate Planning Changes and the For the 99.5% Act

Recently, Senator Bernie Sanders introduced sweeping reforms to the federal estate tax. He introduced the “For the 99.5% Act” to Congress back in March. If passed, the impacts on estate planning will be significant. Fortunately, the changes would not go into effect until the end of 2021. This means that you have the opportunity to review your estate plans and make changes accordingly. Here, we will discuss some of the key provisions of the For the 99.5% Act that may be important for you to take into account in establishing or updating your estate plan with these potential changes on the horizon.

Estate Planning Changes and the For the 99.5% Act

The federal estate and gift tax exemption is currently higher than ever due to changes passed during the Trump Administration. As of now, the federal estate tax exemption sits at $11.7 million per individual and $23.4 million per couple. As you may suspect, this means that the vast majority of Americans do not really have to worry about estate tax implications as most estates will fall below this level. An individual may apply exemption amounts to gifts made during his or her lifetime as well as to transfers made upon his or her death.

The For the 99.5% Act proposes significant changes to exemption amounts. If passed, the federal gift tax exemption would be $1 million per individual. The federal estate tax exemption would be decreased to $3.5 million per individual and $7 million for married couples. Such a substantial reduction in exemption amounts means that many more people are going to be hit with estate taxes unless they plan accordingly.

In addition to the reduction in federal estate and gift tax exemptions, the Act also proposes substantial increases to the estate tax rates for those estates that exceed the estate tax exemption amount. Estates valued at over $3.5 million, but less than $10 million, would be taxed at a 45% rate. Estates valued at over $10 million, but less than $50 million, would be taxed at a 50% rate. Estates valued at over $50 million, but less than $1 billion, would be taxed at a 55% rate. Estates valued at over $1 billion would be taxed at a 65% rate.

The Act would also expand what is included in the taxable estate to some estate planning tools that have been historically removed from that equation. For instance, many have used grantor trusts for the favorable tax treatment they receive. Under this piece of proposed legislation, any assets held in a grantor trust would now be considered to be owned by the trust’s grantor for estate tax purposes. That means, if the estate exceeded the exemption amount, the assets held in the grantor’s trust would be taxable in the grantor’s estate after the grantor passes away.

Estate Planning Attorneys

While these changes are merely proposals at this time, they are so significant that people should be prepared to plan accordingly. Talk to the knowledgeable estate planning attorneys at Hyden, Miron & Foster about your options. Contact us today.


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