Preservation | Family Wealth Protection & Planning

The latest text of the proposed reconciliation bill, titled the Build Back Better Act, published on October 28, 2021, is void of many of the prior proposed tax changes that would have upended estate planning. Changes that were included in the earlier version of the bill but not in this most recent version include:

Wolters Kluwer has released projected 2022 figures for the gift tax annual exclusion amount as well as the estate and gift tax lifetime exemption amount. These figures were determined by Wolters Kluwer using formulas contained in the Internal Revenue Code. They are based on the increase in the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) for the 12-month period that ended August 31, 2021.

On September 28, 2021, the House Budget Committee released a report that provides explanations with respect to certain provisions included in the proposed House bill called the Build Back Better Act (the “Report”).

On Monday, September 13, 2021, the House Ways and Means Committee released the text for proposed tax changes to be incorporated in a budget reconciliation bill called the Build Back Better Act (the “Act”). The 881-page text includes several significant changes to income and transfer taxes that could drastically change estate, gift and individual income tax planning if made into law.

Now that the new year has arrived, it is a good time to catch up on the latest tax rates for estate and trust income tax brackets and exemption amounts for estate, gift and generation-skipping transfer (GST) taxes in 2021. The Internal Revenue Service adjusts these figures annually for cost-of-living increases.

Pursuant to authority granted to the Secretary of the Treasury by President Trump on March 13, 2020 in an emergency declaration, the Treasury and IRS have released a series of Notices postponing both the due date for filing Federal income tax returns, as well as making Federal income tax payments, from April 15, 2020 to July 15, 2020.

On March 27, 2020, the IRS published Notice 2020-20 postponing the deadline to file Forms 709, gift and generation-skipping transfer (GST) tax returns, along with any associated gift and GST tax payments, from April 15, 2020 to July 15, 2020. (see the blog discussing this in more detail here).

The Internal Revenue Service recently published its annual inflation-adjusted figures for 2020 for estate and trust income tax brackets, as well as the exemption amounts for estate, gift and generation-skipping transfer (GST) taxes. These figures are adjusted annually for cost-of-living increases.

Below is a summary of the 2020 figures. The original news release from the IRS may be found here.

With the passage of the Tax Cuts and Jobs Act (TCJA) in December 2017, the nearly doubling of the lifetime estate and gift tax exemption (currently $11.4 million in 2019) shifted the focus for many from estate tax planning to income tax planning. A wide range of income tax planning techniques can now be used under the TCJA, and it is important to explore these income tax planning techniques as a part of the estate planning process.

On June 21, 2019, the U.S. Supreme Court unanimously decided in favor of a taxpayer trust, finding that the state of North Carolina could not tax the trust merely because a trust beneficiary, who received no trust income or right to demand income, resided in North Carolina.

With an estate tax exemption of $11.18 million in 2018 (rising to $11.4 million in 2019), estate planning has been turned on its head. For most people, estate taxes are no longer an issue, and the increased exemption provides options for reducing capital gains taxes. For those families with estates over $22.8 million, the new gift/estate tax exemption provides additional opportunities for estate tax planning.