Earlier in the year, Senator Bernie Sanders proposed new legislation that could make waves in the estate planning world. The “For the 99.5 Percent Act” was introduced, increasing the odds of sweeping federal estate and gift tax reforms during the second half of 2021. The proposed changes would significantly reduce the current federal gift and estate tax exemptions.
In 2021, federal estate and gift tax exemptions are $11.7 million per person and $23.4 million per married couple. This allows individuals to gift away up to $11.7 million during their lifetime without triggering a gift tax. The “For the 99.5 Percent Act” would reduce this exemption to $3.5 million per person or $7 million per married couple, effective January 2022.
Currently, estates in excess of more than $11.7 million are taxed at a flat 40 percent on the excess amount. Proposed new rates would start at 45 percent for amounts in excess of $6.5 million, increasing incrementally with a maximum rate of 65 percent for those in excess of $1 billion.
Under the new legislation, annual exclusion giving will be capped at $30,000. Grantor trusts will no longer be afforded many of the current benefits. Assets owned by a grantor trust will be considered owned by the grantor and included in their estate at the time of their passing. This may potentially subject assets owned by the grantor to the estate tax. While currently existing grantor trusts will be grandfathered in, new trusts would not be.
The “For the 99.5 Percent Act” has not been finalized, but lawmakers are still debating the merits of these changes. Even if the legislation does become official policy, there is reason to be optimistic. The good news about the grandfather policy is that there is still time to act. If you have been considering a grantor trust for your estate, now is the time to put your plans into action. Reach out to us today by calling (281) 885-8826 or schedule online by clicking here to begin protecting your assets.
Kimberly Hegwood is the Managing Attorney of Your Legacy Legal Care, a Houston estate planning law firm. With more than 25 years of experience practicing law in Texas, she represents clients in a wide range of legal matters, including elder law, asset protection, estate planning, Medicaid crisis planning, probate, guardianship, and other estate planning practice areas.
Kimberly received her Juris Doctor from the South Texas College of Law and is a member of the State Bar of Texas.
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