On March 25th, Senator Bernie Sanders introduced the “For the 99.5 Percent Act”(Act) proposing modifications to the estate, gift, and generation-skipping transfer taxes. Passage of the Act would affect any applicable estate or gift transfer occurring after December 31, 2021.
Currently, the estate tax exemption is $11.7 million for individuals and $23.4 million for married couples. These exemptions are set to be to be reduced by one-half (1/2)on December 31, 2025. However, for anyone who will have died on or after December 31, 2021, the Act reduces the exemptions to $3.5 million and $7.0 million respectfully.
Gift tax has two exemptions to consider: the lifetime exemption and the annual exemption.
1. Currently, the annual gift exemption is $15,000.00 per donee, with no limit on the number of donees to whom a donor may gift. The Act would not change the amount of the annual gift, but it would limit the annual gift exemption for certain transfers to irrevocable trusts in which the gift would not be immediately accessible to the donee.
2. Passage of the Act, however, would reduce the lifetime gift tax exemption from $11.7 million per individual to $1 million per individual. This change would mean that you can only gift individuals up to $1 million during your lifetime before having to pay tax on any additional gift amounts.
If the Act passes, many people will find themselves with a taxable estate, and/or potential gift tax consequences. If you would like to speak with an attorney regarding recommendations for the 2021 tax year or discuss how the proposed legislation may affect your estate plan, please contact our office.
