To help raise revenue to pay for President Biden’s Build Back Better Plan, Congress is considering a number of tax law changes, one of which is adjusting estate taxes.  Obviously, nothing is final until the ink dries but the possibility of a change is something to be aware of. 

There are different proposals that we have seen. One of the proposals would reduce the estate tax exemption to anywhere between $3.5 and $5 million, with an effective date of January 1, 2022. Another proposal would bring new rules to grantor trusts, including a change to how life insurance held in a trust would be taxed.  This could affect not only your estate planning but your insurance planning for your family.

At this point, many ideas are being evaluated, but nothing is final. Corporate tax rates, individual tax rates, and capital gains taxes are also on the negotiating table.  I’m sure if you turn on the news you’ll hear plenty of “what ifs.”

Currently, according to IRS.gov, the federal estate tax exemption remains at $11.7 for 2021, with a married couple having a combined exemption for 2021 of $23.4 million.

According to a recent CNBC article, in 2019, 2,570 taxable estate-tax returns were filed, and they owed a combined $13.2 billion. Lowering the estate tax exemption to $5 million would raise an estimated $52.3 billion over five years.  Based on these estimates it seems like it could be a logical move to raise revenue, but again, we’ll know more later.

As difficult as it may be, the best approach is to wait-and-see.  The message is the same for our clients.  We are aware of what is taking place and will adjust if necessary. It would be hasty to make any estate changes based on current discussions.

If you find yourself uneasy because of these talks, reach out to us at Redwood and we can have a discussion about this or any other topic.

This information is not intended to be a substitute for specific individualized tax or legal advice.  We suggest that you discuss your specific situation with a qualified tax or legal advisor.

1-05211428