We spent a great part of 2021 reviewing and analyzing tax proposals which would greatly impact estate planning and strategies to minimize the impact to your estate plan. The good news is that many of our immediate concerns were removed from proposed legislation in the final version of the Build Back Better bill in late 2021, and following is a summary of the current exemptions for estate and gift taxes.

  • Estates and Trusts -The current estate, gift and generation-skipping tax exemption increased to $12.06 million with an applicable tax rate of 40% over the exemption in 2022. The current exemption is scheduled to decrease to approximately $5.5 million per person (or $11 million for a married couple) subject to inflation on January 1, 2026.
  • Gifting -The annual exclusion increased to $16,000.00 per person in 2022.

Currently, tax proposals to remove the step-up in basis, raise the long-term capital gains tax rate and eliminate the estate tax benefits of certain grantor trusts, such as an Intentionally Defective Grantor Trust (IDGT), Spousal Lifetime Access Trust (SLAT) and Irrevocable Life Insurance Trust (ILIT), have been removed from the proposed legislation. However, we continue to monitor tax legislation while continuing to plan and take advantage of our current exemptions before the reduction in the estate, gift and generation-skipping tax in 2026.

We understand the changes to the Build Back Better Bill can be confusing, please do not hesitate to reach out to our Trusts and Estates Practice Group at Brouse McDowell to discuss your estate planning and related tax needs.

Originally Published 18 March 2022

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.