United States: Proposed transfer rights legislation calls for sweeping changes
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Senator Sanders proposed the “For the 99.5% Act” which would increase tax rates on estates, gifts and generational transfers, reduce exemptions from taxes on estates, gifts and transfers generation and would have a significant impact on current estate planning strategies used to reduce inheritance taxes. to bite. Senator Warren proposed a wealth tax imposing an annual tax of 2% on net worth over $ 50 million and 3% on net worth over $ 1 billion. Senator Van Hollen proposed the STEP (Sensible Taxation and Equity Promotion) law which would eliminate the basic mark-up that currently applies to death by taxing unrealized capital gains when heirs inherit valued property, with an exclusion of up to to $ 1 million in earnings. These proposals are in addition to the US Jobs Plan and the US Family Plan in the Biden administration that increase corporate and personal income taxes and capital gains tax rates.
Bill Sanders proposes to make the most sweeping changes to inheritance, gift and generational transfer tax rules since 1986 by reducing the lifetime exemption for donations to $ 1 million and inheritance tax exemptions and cross-generational transfers at $ 3,500,000 (all of which are currently $ 11.7 million). The proposal would also increase the rate of inheritance, gift and generational transfer tax from 40% currently to a progressive range starting at 45% and rising to 65% for transfers over $ 1 billion. Some of the other important proposals will eliminate or reduce the use of FREEs, eliminate valuation discounts for lack of control or lack of negotiability for non-commercial assets, eliminate the benefits of “intentionally flawed fiduciary concessions” and limit the benefits of trust. “Dynasty”. trusts by imposing a tax on the transfer of wealth to these trusts every 50 years.
If these proposals are incorporated into a Senate budget reconciliation bill, it would only take 51 votes to pass. However, if a reconciliation bill is not possible, a qualified majority of 60 votes would be required. As of this writing, it becomes likely that legislation affecting inheritance and gift taxes will not be introduced much until this summer and may not come into force until next year. In addition, many of the proposals will not impact any trusts created or transfers made until after they are passed. Until then, it is still possible to avail of the strategies discussed in the article here.
Anyone whose net worth is expected to exceed $ 3,500,000 at death (or married couples whose aggregate net worth is expected to exceed $ 7 million at death) should explore immediate steps to take to avoid a large estate tax on death. The window of opportunity may soon close. We are available to work with you and your financial advisor or CPA to analyze the planning strategies appropriate to your particular situation and your particular goals.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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