© 2019 by Jonathan G. Blattmachr & Martin M. Shenkman. All Rights Reserved.
With the estate, gift and GST exemption at nearly $11.5 million and scheduled to grow until 2026 when they will be cut in half, few advisers are focusing on wealth transfer tax planning for their clients. And even fewer clients at wealth levels that are not significantly in excess of the current exemptions, e.g. couples perhaps under $25 million, are considering planning options. That may all prove a costly mistake. But nothing seems ever to stay static. And if the political winds turn sharply Democratic, there is a real likelihood that tax changes of extraordinary measure may occur. The good news for some is that the deduction for state and local taxes may be fully restored. There may be bad news for others, such as those holding stock in corporations that may have their income tax rates increased dramatically.
In any case, there are proposals (many of which have been made before) that would drastically affect estate tax planning. Many of the components of the proposals include restrictions on estate tax planning similar to those contained in President Obama’s Greenbook. The climate has also changed. There is an increasing chorus of complaints to the effect that the “wealthy are not paying their share of taxes.” This sentiment may have been compounded by the recent scandal of wealthy and famous people paying bribes to secure college acceptances for their children. Overall, this environment should cause worry for those of wealth and motivate them to act while they can. And because most estate tax planning typically takes years to produce significant positive results, it seems appropriate for practitioners to consider that impact of the proposals on their clients, advise them of potential changes and, at least in many cases, encourage them to act now. There are also significant benefits to beginning planning earlier, rather than waiting for more certainty that the law might in fact change. Every practitioner remembers the rushed transactions at the end of 2012 when it was believed that the exemption might decline from $5 million inflation adjusted to $1 million in 2013. Many of the plans were implemented with inadequate thought and planning, too short of a duration between asset transfers and trust funding and more. These problems were not the result of practitioners and clients both not knowing the risks, but rather were the inevitable result of the compressed time frame during which planning had to be completed. No one should want a repeat of that scenario.
One set of proposals is set forth in Senate Bill S. 309 introduced by Bernie Sanders. S.309 — 116th Congress (2019-2020), dubbed "For the 99.8 Percent Act" (“Proposal”). The title alone reinforces the anti-wealthy sentiment that seems to be growing. Here are some highlights of the bill and a brief discussion as to what the changes mean for certain clients and, perhaps, what they should do.