Did you know the 2020 presidential race is already in its beginning stages and income and tax transfer planning for the wealthy is already a hot topic of discussion? Senator Bernie Sanders recently introduced a bill called the “For the 99.8 Percent Act,” aptly named for the percent of the population who will not be impacted by the bill.
The Act proposes a reduction of the estate tax exemption and other limitations on common estate planning techniques.
To better inform you about the proposed Democratic changes, let us share with you some information about the “For the 99.8 Percent Act.”
First, what exactly is the “For the 99.8 Percent Act”? Senator Sanders’ new proposal plans to leave the majority of estates untaxed, while creating a “graduated rate structure for the estates of the very rich, topping out at a maximum rate of 77 percent.” This essentially means that the government will use the fortunes of wealthy Americans as a key source of revenue. Under current United States tax law, the wealthy are permitted to pass down $5.5 million in untaxed funds to their heirs. While Republicans recently introduced legislation calling for the elimination of the estate tax, thereby allowing funds to pass tax-free from America’s wealthiest to their children, Senator Sanders’s new proposal calls for the opposite.
Under the “For the 99.8 Percent Act,” the largest estates would be taxed according to the following multi-tiered structure:
- A 77 percent rate on wealth over $1 billion
- A 55 percent bracket on wealth from $50 million to $1 billion
- A 50 percent bracket from $10 million to $50 million
- A 45 percent bracket from $3.5 million to $10 million
While this new tax proposal is targeted at the wealthiest Americans, it may have consequences for you and your estate in the future. We know this can be a complicated topic to understand. It is important to be aware, however, of new proposals coming down the pipeline and their potential implications for your estate and assets. Bear in mind, in our practice, we are not only keeping an eye on federal changes but those on the state level as well. If you have questions about anything raised in this article or any other estate planning related questions, do not wait to contact our office.