Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Friday, April 2, 2021

U.S. Senate Introduces Legislation for Higher Taxes on Wealth

Wealth taxOn March 25, 2021, Senator Bernie Sanders introduced the For the 99.5 Percent Act (the 99.5 percent Act). The Act looks to modify the estate, gift, and generation-skipping transfer tax. 

If accepted, the Act would "reduce the estate tax exemption, set the gift tax exemption at an amount lower than the estate tax exemption, and increase tax rates on large gifts and estates, effectively returning the gift and estate tax rules to the law in effect in 2009, but with higher rates." The changes would apply to transfers occurring after December 31, 2021. 

Other changes under the Act include: 

  • The estate tax exemption amount would be reduced to $3.5 Million per individual ($7 Million for married couples), with no adjustment for changes in the cost of living. Under current law, the estate tax exemption amount is $11.7 Million per individual ($23.4 Million for married couples), adjusted annually for changes in the cost of living. However, the current exemption amount is scheduled to be reduced by 50% after December 31, 2025. 
  • The amount of the exemption available to shelter lifetime transfers from gift tax would be reduced to $1 Million per individual ($2 Million for married couples), with no adjustment for changes in the cost of living. The portion of the $1 Million exemption used during an individual’s lifetime to shelter lifetime gifts from gift tax would reduce the amount of the $3.5 Million exemption available to shelter transfers at the individual’s death from estate tax. Under current law, the gift tax exemption is the same as the estate tax exemption (and will also be reduced by 50% after December 31, 2025), and any amount not used during an individual’s lifetime is available to shelter transfers at death from estate tax. 
  • The estate tax rate would increase using a progressive tax rate based upon the value of the decedent’s estate:
    • There would be no tax on the first $3.5 Million of the estate.
    • There would be a 45% tax on the estate in excess of $3.5 Million up to $10 Million.
    • There would be a 50% tax on the estate in excess of $10 Million up to $50 Million.
    • There would be a 55% tax on the estate in excess of $50 Million up to $1 Billion.
    • There would be a 65% tax on the estate in excess of $1 Billion.

See U.S. Senate Introduces Legislation for Higher Taxes on Wealth, Greenberg Glusker, March 26, 2021. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

https://lawprofessors.typepad.com/trusts_estates_prof/2021/04/us-senate-introduces-legislation-for-higher-taxes-on-wealth.html

Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, New Legislation | Permalink

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