Tax Implications of New Administration
With the new administration, significant tax proposals are being considered. With a federal budget deficit at an all-time high of $3.1 trillion in 2020, the current administration has proposed major changes to the federal estate and gift tax structure. These changes include:
Reducing the Estate tax exemption from the current level of $11,700,000 to $3,500,000;
Reducing the lifetime Gift tax exemption to $1,000,000;
Increasing the current Estate tax rate from 40% to 45% for Estates valued from $3,500,000 to $10,000,000, up to 50% for Estates valued up $40,000,000, 55% for Estates valued up to $950,000,000 and 65% for those Estate valued above $950,000,000;
In addition, a proposal would limit a grantor’s annual gift exclusion to up to $30,000 in certain circumstances. A change from the current annual exclusion of $15,000 per donor/per donee structure; and
Significant changes to the tax structure of grantor retained annuity trusts as well as family owned non-business entities.
In addition to the foregoing proposals, further tax changes are up for consideration:
The top income tax rate back up to 39.6%;
Corporate tax rate, now 21%, up to 28%; and
Modification of capital gains and dividend tax rates from the current 20% to around 24%.
While none of the proposals are set in stone, they would, if enacted, likely not be effective until January 1, 2022. However, based upon the Internal Revenue Code, any proposals (specifically those related to Estate and Gift taxes) enacted prior to December 31, 2021, could be retroactive as of January 1, 2021.
If you have any questions regarding the proposed changes and your current Estate Planning needs, please contact us at your convenience.