"For the 99.5% Act": Proposed Estate Planning Implications

The recent tax bill proposed by Senator Bernie Sanders would dramatically alter the estate tax landscape and would eradicate or severely limit a number of estate planning strategies that families have relied upon for decades. These changes could be effective after December 31, 2021, in part, as follows:

• Estate and GST tax exemptions to be reduced from $11.7 million to $3.5 million and not indexed for inflation

  • GST trusts capped at 50 years

• Gift tax exclusion to be reduced from $11.7 million to $1 million and no longer unified with the estate and GST exemptions

• Tax rates of:

  • 45% for estates over $3.5 million and under $10 million

  • 50% for estates over $10 million

  • 55% for estates over $50 million

  • 65% for estates over $1 billion

• Availability of valuation discount planning to be reduced (likely before the beginning of 2022)

• Zeroed-out grantor retained annuity trusts (GRATs) and short-term GRATs to be eliminated

• Grantor trusts and insurance trusts to be included in the taxable estate

Any estate planning strategies implemented before the bill becomes law may be grandfathered in and unaffected by these proposed changes. Consider creating and funding your trusts as soon as possible. Contact one of our estate planning attorneys at 847-382-9195 or visit our website for guidance on the right strategy for you and your family.