With each new presidential administration come new ideas and new directions for taking our tax laws as a nation. While one president may cut the taxes dramatically, the other could see taxes as the way to fund the future. In 2021, Sen. Bernie Sanders proposed a new tax bill called the “For the 95.5 Percent Act,” named so for the intent to place higher tax rates on the richest 0.5% of America.
Currently, the estate and gift tax has tax exemptions for anything less than $11.7 million. Under the new bill, the number would be brought down to $3.5 million, meaning that it will significantly affect more estates.
How Will This Bill Affect Current Estate Planning Strategies?
Primarily, the new bill will now affect more estates with the burden of taxation. Other considerations for how things may change include:
- Under the newly proposed bill, people will not be able to gift anyone more than $1 million without incurring a gift tax.
- Assets put in irrevocable trusts may not avoid income taxes anymore under the new bill.
- The maximum federal estate tax rate will be raised to 45% for those with an estate worth $3.5 million. For those with estates worth more than $10 million, a 50% estate tax will be enforced. And for estates worth over a billion dollars, the US government would ask for a 60% estate tax rate.
- The new bill will also prohibit the use of valuation discounts for non-business assets and dramatically limit the use of Grantor Retained Annuity Trusts.
When Will the ‘For the 99.5% Act’ Go Into Effect?
There is no guarantee that the proposed bill will ever be signed. However, if and when it does get the signature of the president, the new changes could go into effect at that very moment.
For this reason, if you have a large number of assets in an irrevocable trust, you may want to explore alternative options, as they may be at risk of new taxation before long.
When Should You Speak with an Attorney?
Right now, the new tax bill by Sen. Bernie Sanders and others has not been signed into law and can only be considered a political proposal. However, it is representative of political intentions and could be signed into law at almost any time. If and when that happens, wealthy estate plans could change dramatically.
Contact our law firm today at (720) 420-1039 to learn more about how we can help you with your situation.