Something Big is Coming – Estate and Gift Tax Change is in the Wind!

Let’s take a look at two of the Senate proposals which have gotten some attention as well as the outlines of the Biden administration’s proposals.  The Senate proposals are:  “For The 99.5% Act” and the “STEP Act” (Sensible Taxation and Equity Act). 

The two Senate proposals take very different directions when it comes to gift, estate and generation skip tax rules. The 99.5% Act maintains the basic philosophy of the current transfer tax system but curtails planning concepts that are deemed abusive, decreases and changes certain exclusions and exemptions and increases transfer tax rates.  The STEP Act changes the dynamics of the transfer tax system, treating many transfers as a sale of the asset which will require capital gains to be paid at the time of the transfer.  (The basics of the STEP Act may seem familiar to many as it is essentially the transfer tax system in Canada.) It appears that the American Families Plan takes the form of the STEP Act which would transform the transfer tax system.

Consider some of the key elements of the proposals, possible consequences of those changes as well as what current planning might make sense for high net worth clients.

The proposals appear to set the effective dates as 01/01/2022 which leaves planners some time to guide high net worth clients though the potential impact of waiting vs. taking action today. 

Visit the National Life Agent Blog for more information as well as downloadable resources.