The coming storm
Yesterday, May 20, 2021, Senator Bernie Sanders (I-VT) introduced Section 994, the “For the Law at 99.5%,” to “restore inheritance and generation skipping taxes, and to other purposes ”. This law amends the Internal Revenue Code by increasing the gift and inheritance tax rates from 40% to 65% and by decreasing the basic exclusion amount from $ 10 million, adjusted for inflation. at now over $ 11.7 million, to $ 3.5 million without adjustment. for inflation.
Up to $ 3.5 million No tax
$ 3.5 million to $ 10 million 39%
$ 10 million to $ 50 million 50%
$ 50 billion to $ 1 billion 55%
Over $ 1 billion 65%
The law also reduces the limitation on special purpose valuation under Code Sec. 2032A from $ 3 million to $ 750,000, adjusted for inflation. The bill also eliminates valuation discounts for certain transfers of non-commercial assets, imposes a minimum ten-year term for annuity trusts kept by the settlor (FREE) and provides that the current taxable donation on residual interest for a FREE must be at least an amount equal to the greater of 25% of the assets of the trust or $ 500,000.
The Act eliminates appraisal rebates for certain non-commercial asset transfers and would apply an inclusion ratio of one to any generation-leap transfer trust that lasts more than 50 years, and would impose a limit of two donees for annual exclusion donations.
A law is not law until it has been signed by the president, and a lot can happen between filing and signing. What this means is that time is running out to use the estate tax exemptions, rebates and estate planning techniques referred to in the Act before the changes are final. So if you haven’t taken action yet, you should do it right away.
It also affects the planning that has already been done in the past. So I expect a storm of changes to try to minimize taxes before and after the act comes into force.