To help raise revenue to pay for President Biden’s Build Back Better Plan, Congress is considering a number of tax law changes, including adjusting estate taxes. Many people are wondering how these changes could affect them.
One of the proposals would reduce the estate tax exemption, currently $11.7 million for 2021, 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.1,2 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.
For now, the federal estate tax exemption remains at $11.7 million for 2021, with a married couple having a combined exemption for 2021 of $23.4 million.3 However, it wouldn’t be a surprise if the estate tax law changed as part of the overall plan. 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.1
As difficult as it may be, the best approach is to wait-and-see. It would be hasty to make any estate changes based on current discussions. This article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and financial professionals before modifying your estate tax strategy. Escient Financial is here to provide help and guidance, so feel free to...
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