This reprint appeared in a recent issue of Thomson Reuters’ Practical Law Journal and provides a Q&A on the future of the federal estate tax, and the ramifications for estate planning.  

  • On November 2, the House Committee on Ways and Means released the “Tax Cuts and Jobs Act.” 
  • The proposal would double the federal estate and generation-skipping transfer tax exemption amounts to $10 million (indexed for inflation), phase in full repeal by January 1, 2024 and maintain the step-up in basis at death. Beginning on January 1, 2018, the lifetime gift tax exemption amount would double to $10 million (indexed for inflation), with a top gift tax rate of 35% and an annual exclusion of $14,000 (indexed for inflation).  
  • On November 9, the Senate Finance Committee released its proposal. Under the Senate plan, the federal estate tax would not be repealed, but the exemption for federal estate and gift tax would double.  
  • Ultimately, both the House and the Senate need to agree to the same legislation, which can then be sent to the president for signature.  

What to do in the interim in the face of massive uncertainty? The most recent legislative activity underscores the point that potential repeal of the estate tax is not a reason to delay planning. Waiting for clarity on this issue is a mistake; planning is critically important with or without a federal estate tax.  Building flexibility into plans to deal with a variety of outcomes is the key. In any event, repeal would likely not be permanent.

To ensure compliance with requirements imposed by the IRS, we inform you that, while this article is not intended to provide tax advice, in the event that any information contained in this presentation is construed to be tax advice, the information was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax related penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any matters addressed herein.

Please read important disclosures at the end of the article.

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