For your estate plan to be effective, it needs to take advantage of the latest tax laws. With a new government in place this year, there may be changes ahead.
A group of senators recently presented a proposal known as the “For the 99.5% Act.” If you have considerable assets, the changes could hit you hard.
What are the proposed changes to estate taxes under the “For the 99.5% Act”?
Essentially, the idea is that those with considerable assets generally need to pay more taxes. Here are the proposed changes to estate taxes:
- The estate tax threshold: The previous administration increased it. Currently, this sits at $11.7 million. The current administration has mentioned plans to reduce it on several occasions. The new proposal would reduce it to $3.5million. That would bring it down to $7 million per couple instead of $23.4 million.
- Rate of the estate tax: Under the proposed act, the rate would rise from 40% to 45% once over the proposed $3.5 million limit. Once you pass $10 million, it would increase to 50%. There would be further increments up to a rate of 65% for those leaving over $1 billion in their estate.
- Gift tax exemption: The limit is currently $11.7 million per individual over their lifetime. As a couple, you can combine your gift tax exemptions to make a current total of $23.4 million. There is also an annual limit that counts toward your lifetime limit. If either the lifetime or annual limit was to decrease, you could not transfer as much as before tax-free. The proposed legislation would reduce the individual lifetime limit to $1 million.
Even if the bill does not pass in its current form, there are likely to be some changes to estate taxes soon. If you wait too long to adjust your estate plan, it could cost you (or your heirs) dearly.