Estate Tax

When President Trump first rolled out his much-anticipated tax plan as a presidential candidate in 2016, his plan to eliminate the federal estate tax (referred to as the "Death Tax" on his campaign website) caught the eye of many high-net-worth individuals and estate planners alike. Since this objective has traditionally aligned with Republican viewpoints, and because the Republicans control the House of Representatives and the Senate, the odds for estate tax reform and/or repeal were rapidly rising.

On November 2, 2017, the House Committee on Ways and Means released a tax reform plan known as the Tax Cuts and Jobs Act (the "Act"). As expected, the bill targeted, among other areas of current tax law, the estate, gift and generation-skipping transfer taxes.

Under the Act, for transfers between January 1, 2018 and December 31, 2023, the estate, gift and generation-skipping transfer tax regime will remain in place, but the exemption per individual would double to $10,000,000 adjusted for inflation. The estate and generation-skipping transfer taxes will be repealed for decedents with a date of death on or after January 1, 2024. Despite the repeal of the estate and generation-skipping transfer taxes on January 1, 2024, the gift tax would remain in effect with two (2) modifications from current law. First, the gift tax would retain the exemption amount of $10 million, adjusted for inflation. Next, the top gift tax rate is lowered from 40% to 35%.

Finally, and perhaps most interestingly, the provision that affords the beneficiary of inherited property a basis "step-up" on date of death would remain in effect. In other words, beginning on January 1, 2024, an estate would not be subject to estate taxes, yet the beneficiaries will receive a step-up in basis equal to the fair market value of the inherited property on the decedent's date of death.

On November, 9, 2017, the Senate Republicans released a Chariman's Mark, which is scheduled for markup by the Senate Finance Committee on November 13, 2017. In the report, the Joint Committee on Taxation simply proposed doubling the lifetime exemption to $10,000,000, adjusted for inflation. The proposal does not contain a repeal of the estate or gift tax. Further, the proposal keeps the current basis "step-up" rules. The next step is to monitor how Congress reconciles the differences between the two houses and what an eventual tax from bill contains.

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