What You Need to Know About Estate and Gift Tax Bill Reform

There is a lot to know about the proposed Senate bill reform concerning estate and gift taxes. Recently, Senator Bernie Sanders issued his proposal, which was 18 pages long and had some pretty significant financial implications for Americans.

These bills are commonly referred to as “For the 99.5% Act,” which was introduced by Senators Sanders and the Whitehouse, and the “Sensible Taxation and Equity Promotion Act of 2021,” or “STEP Act,” introduced by Senator Van Hollen and others.

If passed, the estate tax exemption will be reduced from $11,700,000 to $3,500,000, and the gifting exemption will be reduced to just $1,000,000 starting January 1, 2022. This doesn’t leave much time for families and their financial advisors to plan accordingly with tax planning techniques; however, it’s important to understand these changes before the ink dries on this Bill.

I encourage everyone to speak with their financial advisors and tax planning professionals soon to try and get in front of this. There will be different dollar amounts per person, per married couple, etc., and forming an irrevocable trust may make sense to prevent creditors from reaching the trust in the event of financial hardship. But, again, a licensed tax lawyer or advisor can explain everything in more detail.

Many experts expect that demand for tax lawyers and advisors will increase dramatically in the coming months because of these proposed law changes. So, if you feel like you may be impacted, your best course of action is to make an appointment as soon as possible with your tax advisor or lawyer. Ask all of your questions now and plan accordingly. This is also important because most financial arrangements that were entered into before this bill being enacted will benefit from being grandfathered in from both an estate and gift tax standpoint.

Change is inevitable, but knowledge is power, particularly in this instance. So take some time to understand these proposed changes to estate and gift tax laws if you feel like your family will be impacted.

I’m a local real estate professional who has decades of experience in the Pasadena area. I am available to assist you in buying or selling a home, so please contact me if you would like to schedule a time to discuss your needs. 626.714.6808