The estate planning world, financial planning world, and lawmakers considered a number of significant changes to estate and gift taxes the end of 2021 and the Biden Administration set forth a series of proposals to pay for the Build Back Better Act. There was discussion of reducing the estate and gift tax exemption from its $11,700,000.00 (or $23,400,000.00 for a couple with portability) to as low as $3,500,000.00 (or $7,000,000.00 for a couple). There were smatterings of changes to Grantor trusts (usually found in Irrevocable Life Insurance Policies or Qualified Residence Trusts), and even discussion of getting rid of the step-up in basis which would trigger capital gains tax on inherited assets. Another blow would have come with capping annual gifting at a total of $20,000.00 total in a year (instead of $15,000.00 to as many individuals as the donor wished).
Fortunately, all of the above came to naught as 2022 rolled around. The current estate and gift tax exemption of 2022 is $12,060,000.00 (or $24,120,000.00 for a couple). There is still a step-up in basis for inherited property and assets, and the annual gifting limits are higher than ever at $16,000.00 (or $32,000.00 for a couple) per beneficiary. Parents could gift their five adult children $16,000.00 to each child from each parent (or $32,000.00 to each child for a total of $160,000.00).
The proposed “For the 99.5%” Act never came to fruition. Grantor trusts still have the same benefits as before and the Generation Skip Tax is matched at the estate tax exemption levels. With no significant changes to rock the boat, now is the time to strike in Estate Planning.
Under current law, the estate tax exemption and gift levels will reduce in 2025. Unless the legislature takes action to extend the current amounts, the law will reduce the estate and gift exemption levels to $5,000,000.00 (indexed for inflation so likely somewhere around $6,000,000.00). Additionally, there is always the possibility that the “For the 99.5%” Act could resurrect itself and push through the House and Senate to become law before 2025.
If you have a taxable estate or will have a taxable estate, you should consult with your financial advisor and an estate planning attorney to see what planning can be done to provide the maximum level of protection and consideration for your future. Because we do not know what the future holds, we do not recommend sheltering all of your assets, but we do advise caution and thoughtful solutions. Even if the “For the 99.5% Act” becomes law, the next administration could reverse it all later. The best course is to look at your goals, your assets, and find the plan that works for you now and provides a good outlook for your future as well. There are many techniques that can allow for asset protection but still provide flexibility.
Grissom Law, LLC can work with you to find the right solution for your needs. From taxable estates, to modest assets, we work with clients in all walks of life. Estate Planning is about providing for the needs of you and your family.
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This Blog/Web Site is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide legal advice. By using this blog site you understand that there is no attorney-client relationship between you and Grissom Law, LLC.