Act Now! Gifting Exemption Reduced to $3.5M in Latest Senate Bill

estate and gift tax reform

2 min read

In case you missed it, the Senate recently released a proposal for estate and gift tax reform. A version of this 18-page bill will likely be introduced in the House of Representatives soon, so we want to make you aware of what’s on the table. 

The Forbes article linked below includes an excellent, in-depth look at the new rules, along with planning pointers. We encourage you to check it out.

Read More: Senate Estate And Gift Tax Bill Will Reduce Exemption To $3,500,000 And Take Away Many Opportunities

Three Key Takeaways of the Proposed Estate and Gift Tax Reform

1. The estate tax exemption amount would be reduced from the current level of $11,700,000 per person to only $3,500,000 starting January 1, 2022, and rising with inflation in the following years. 

2. The gift tax exemption, which is also currently set at $11,700,000, will go down to $1,000,000 in 2022 if this bill passes. This exemption is reduced when an individual makes a gift that exceeds $15,000 per year / per person. After those amounts, an individual would only be able to gift $1M without paying gift tax.

3. Beginning in January 2022, there will be a significant increase in the estate tax rate, currently set at a flat rate of 40%. Under the proposed bill, the new rate will be 45% for the first $6.5M of taxable estate, then 50% for the next $40M of taxable assets, 55% for the next $50M of taxable assets, and 65% on anything over that.

Our Advice? Start Planning Now!

While a bill is far from passage, and we know there will be many different proposals before legislation is enacted, the message is fairly clear. Exclusions will come down, techniques will be limited, and tax rates will increase.  

This highlights the need to take advantage of good planning while the opportunities are available, and we thought this should be something on your radar for the near term.

Please don’t hesitate to reach out to us if we can help you with any planning.

We are here to make the complex simple.

April 12, 2021