Keeping Up With the Congress: Your Estate Plan Depends on It!

In 2019, there have been approximately 25 bills proposed by members of Congress that are directly related to estate taxes and many more impacting retirement planning. Here are a few examples:

  • In January, by Rep. Jason Smith (R-MO), proposed a bill that called for the repeal of the estate and generation-skipping transfer taxes and made conforming amendments related to the gift tax.
  • In June, Sen. Chris Van Hollen (D-MD), proposed a bill that would return the taxation of estates and gifts to levels that were in effect in 2009. It would also combine the existing Social Security trust funds into a single Social Security Trust Fund and provide for the deposit of increased estate and gift tax revenue into the consolidated trust fund.
  • More recently, in October, Rep. Jimmy Gomez (D-CA) proposed the "For the 99.8% Act" -  a carbon copy of a bill that Sen. Bernie Sanders (D-VT) had proposed at the beginning of the year - which would increase tax rates on decedent estates, gifts, and generation-skipping transfers. If passed, estates with a value of over $1 billion would be taxed at a 77% tax rate and reduces the basic exclusion amount to $3.5 million. And it goes on...If passed, the legislation would:
  • Increase (1) to $3 million the reduction in valuations of farmland for estate tax purposes and adjust such increased amount for inflation, and (2) to $2 million the maximum estate tax exclusion for contributions of conservation easements.
  • Require (1) consistent basis reporting for property acquired by gift and transfers in trust, and (2) executors of estates and donors of gifts required to file a gift tax return to disclose to the Department of the Treasury, and to recipients of any interest in an estate or a gift, information identifying the value of each interest received.
  • Set forth estate valuation rules for certain transfers of nonbusiness assets and limit estate tax discounts for certain individuals with minority interests in a business acquired from a decedent.
  • Expand rules for valuing assets in grantor retained annuity trusts to require that (1) the right to receive fixed amounts from an annuity last for a term of not less than 10 years and not more than the life expectancy of the annuitant plus 10 years, and that such fixed amounts not decrease during the first 10 years of the annuity term, and (2) the remainder interest have a value when transferred that is not less than the the greater of 25% of the fair market value of the trust property or $500,000.
  • Set forth rules for the application of transfer taxes to a grantor trust (a trust in which the grantor retains control over the trust assets and has the right to receive income from the trust).
  • Eliminate the generation-skipping transfer tax exemption for any trust whose termination date is not greater than 50 years after its creation.
  • Modify the gift tax exclusion for annual gifts (currently, $14,000).

Of course, not all proposed bills become law. Many of them only serve to represent the ideological differences between our two-party system. Republicans want to lower or eliminate estate taxes, while Democrats want to raise estate taxes, particularly on the estates of the ultra-wealthy.

We don't expect you to be following the dozens of tax bills that make their way through Congress. That's our job as estate lawyers - and it’s something that we are uniquely qualified to do. Our goal is to create an estate plan that has the flexibility to weather political shifts, on national and state levels. Of course, no estate plan can stand the test of time. As I often say, an estate plan is a living, breathing document. It must adapt to the changes in your life and changes to the laws!

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