You may have noticed the increased news coverage surrounding the 2020 presidential election, but have you heard about the new proposed estate tax exemption? Recently, Senator Bernie Sanders of the Democratic party introduced a bill titled “For the 99.8 Percent Act.”
This proposes a reduction of the estate tax exemption and various other limitations on popular estate planning techniques.
To help you learn more about the proposed changes and to evaluate whether you may personally be affected, let us share with you some information about the “For the 99.8 Percent Act.”
First, what are the proposed changes under the “For the 99.8 Percent Act”?
Under the current tax law in the United States, the wealthy may leave up to $5.5 million untaxed to their heirs.
Senator Sanders’s new proposal would change that, as it seeks to leave the vast majority of estates untaxed, while only taxing the wealthiest of estates. Essentially, the Act will create a “graduated rate structure for the estates of the very rich, topping out at a maximum rate of 77 percent.” Further, the Act is in opposition to recent legislation proposed by the Republican party, which would allow funds to pass tax-free from the wealthiest Americans to their heirs.
The proposed Act would tax the largest of estates according to a multi-tiered structure, placing estates in brackets.
The Act creates a “45 percent bracket from $3.5 million to $10 million, a 50 percent bracket from $10 million to $50 million, a 55 percent bracket on wealth from $50 million to $1 billion, and a 77 percent rate on wealth over $1 billion.” If you believe your estate falls into one of the listed brackets, your estate may be implicated.
It is important to understand that, although this new tax proposal is targeted toward the wealthiest Americans, it may still have implications for you and your estate. Currently, the Act is proposed legislation that has not yet been adopted. Being aware of proposed law changes, however, is important to helping ensure you are not taken off guard if new laws are implemented. We know this can be a particularly complicated topic to understand, and we are keeping a watchful eye on changes at both the federal and state level. If you have questions or concerns about anything raised in this article, or other estate planning related questions, we encourage you to reach out to our office.