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Your Current Estate Plans Are Likely Safe For Now.

So the "final" Build Back Better plan was outlined by President Biden about ten days ago. In my last blog entry, I outlined the estate provisions in the original $3.5T bill, the newly negotiated bill has a price tag of approximately $1.7T to $1.9T. (The range results from who is doing the calculating and what assumptions they are using.) The scaled-back bill resulted in scaled-back tax consequences. While significant tax changes regarding personal and corporate income taxes remain, most of the provisions affecting estate planning are not in the current draft.


The revised bill removed the change in estate exemptions. Therefore the current exemption of $11.7M per individual established by the Tax Cuts and Jobs Act of 2017 will continue until the original sunset of 2025. Unless some other congressional action changes it, the exemption will revert in 2026 to $5M per person adjusted for inflation since 2010.


The provisions regarding grantor trusts have been removed. The preliminary draft effectively killed the usefulness of such trusts for estate planning purposes and would have required clients review their plans in light of the change. I suspect the original provisions were just too broad to receive support from more moderate members. In an attempt to address both real and perceived cases of abuse, the provision as drafted killed a key estate planning device used by those of even moderate means to address a multitude of issues including blended families and ensuring the ongoing viability of small family businesses. Look for Democrats to readdress the issue in what will likely be a reduced and more focused manner if they still hod majorities in both chambers after the midterm elections in 2022.


Similarly, the valuation provisions of the house bill have been removed from the current draft. Those provisions would have significantly altered how assets were traditionally valued when such assets were highly illiquid and the holder had limited control of the underlying business.


It is important to note that nothing is final until a bill is passed and signed, so like a zombie, these "dead" provisions may come back to life if the House and Senate leadership believe they can reintroduce them and have a bill that will pass both chambers. The consulting firm Plante Moran posted a more comprehensive, but still very readable, review of the changes last week. If you want more information, I encourage you to read it.




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