Sunday, April 10, 2022
Since September 2021, there has been a lot of talk about the Build Back Better Act, which included some major tax increases. However, it is most likely that the Build Back Better Act will not come to fruition.
Although the Act is likely dead, the contents of the Act may be an indicator of what type of things Congress is likely to focus on in regard to taxes. An example of one of these areas are "death taxes." "Death tax" is a form of transfer tax and is formally refereed to as estate tax.
There are three types of transfer taxes:
- The gift tax, which applies to gifts made during a life;
- The estate tax, which imposes a tax on the gross estate prior to any bequests being made; and
- The generation skipping transfer tax, which applies to gifts or bequests that are received by a person who is more than one generation removed from you (for example, a gift an individual makes to their grandchild).
Much of the conversation is surrounded around gift tax and estate tax. Congress sets a dollar cap "for gifts that a person can make during life or bequests after death before a transfer tax will apply. . ." This cap is referred to as the "exemption amount." A lot of the talk around the Build Back Better Act was focused on the potential change of this "exemption amount."
Given the potential impact a change in the exemption amount can be, it is important to plan for the uncertainty.
For more information:
See Dylan H. Metzner, Taking the Sting Out of “Death Taxes”, Jones & Keller, April 1, 2022.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.