Proposed "For the 99.5% Act" Bill to Drastically Change Estate and Gift Tax Laws

Margaret G. Kubicki

On March 25th, Bernie Sanders introduced the “For the 99.5% Act” bill.  This legislation (if enacted) would make significant changes to the federal estate and gift tax laws.  Although the bill will not likely pass as written, it is quite possible that something similar could be enacted.  It is noteworthy that Sanders’ effective date would be the date of enactment so timing becomes fairly important.

Below is a list of some of the main provisions included in the bill:

  • Federal estate tax exemption reduced from $11.7 million to $3.5 million
  • Gift tax exemption reduced from $11.7 million to $1 million
  • Increase in estate and gift tax rates from 40% to up to 65%
  • Elimination of short-term GRATs
  • “Grantor trusts” would be included in a decedent’s estate.  Many irrevocable trusts are grantor trusts for income tax purposes even though the trust assets are excluded from the grantor’s estate for federal estate tax purposes. If enacted, this law would make the type of planning we do with sales to trusts virtually extinct.  Also, Irrevocable Life Insurance Trusts would no longer be available to shelter life insurance proceeds from estate taxation without very careful planning.
  • Elimination of minority discounts on valuations
  • Elimination of certain types of marketability discounts for assets that are not used in an active trade or business (passive assets)
  • Dynasty trusts would result in estate taxation at some period of time due to implementation of a federal 50-year rule against perpetuity

It is impossible to determine what will be passed into law, but it is likely that Congress will pass laws that will increase the estate tax that may be due upon your death as well as your ability to plan ahead to reduce such taxes.  Please reach out to someone in our Private Client Services Group if you would like to discuss whether you might benefit from planning ahead for any potential changes to the federal estate and gift tax laws.

James H. Brun
513.579.6585
jbrun@kmklaw.com

Adam J. Centner
513.579.6488
acentner@kmklaw.com

Margaret G. Kubicki
513.579.6913
mkubicki@kmklaw.com 

Claire V. Parrish
513.579.6936
cparrish@kmklaw.com 

Joseph P. Rouse
513.579.6416
jrouse@kmklaw.com 

KMK Law articles and blog posts are intended to bring attention to developments in the law and are not intended as legal advice for any particular client or any particular situation. The laws/regulations and interpretations thereof are evolving and subject to change. Although we will attempt to update articles/blog posts for material changes, the article/post may not reflect changes in laws/regulations or guidance issued after the date the article/post was published. Please consult with counsel of your choice regarding any specific questions you may have.

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