Trust & Estate Strategies Protected in New Tax Proposal

The new reconciliation bill that was introduced in the House of Representatives eliminates some of the more significant tax changes that were proposed in the original bill approved by the House Ways & Means Committee in September.
For trust and estate planning purposes, the new “Build Back Better Act” leaves several valuable tax-savings strategies in place. The revised bill:
  • Does not reduce the gift, estate and generation-skipping transfer taxes exemption, which is set to increase to $12.06 million on January 1, 2022. The original bill proposed to cut the exemption amount in half.
  • Leaves the rules on grantor trusts and GRATs unchanged, retaining the full value of these estate planning techniques. The original bill would have greatly reduced their effectiveness.
  • Does not eliminate valuation discounts for the transfer of passive assets, including minority interests in family investment partnerships.
Other tax provisions in the original bill remain unchanged and will impact gifting and trust and estate planning. High-net-worth taxpayers and non-grantor trusts would still lose the 75% and 100% exclusion from capital gains tax for the sale of qualified small business stock (QSBS) up to the greater of $10 million or 10 times the owner’s basis in the shares.
The revised bill also introduces a 5% surtax on a non-grantor trust’s modified AGI in excess of $200,000 and an additional 3% surtax on the trust’s modified AGI in excess of $500,000.
Just like the original bill, the provisions in the revised bill are only proposals and subject to change. Given the amount of uncertainty surrounding potential changes to tax law, it is vital to ensure your tax, trust and estate planning are considering all possible scenarios.

Lisa Rispoli Lisa Rispoli is the Partner-in-Charge of Trust & Estate Services at Grassi. With over 30 years of experience in accounting, estate planning and gift, estate and trust taxation, Lisa is adept at working with clients and their other professional advisors to develop estate plans to transfer family, businesses and personal wealth to the next generation and to charitable organizations. Lisa assists executors and trustees,... Read full bio

Categories: Tax, Trusts & Estates