Lightning over the U.S. Capitol

The House of Representatives’ tax bill would eliminate grantor trusts and undermine most major tax planning strategies.

This client notice is most relevant for individuals having a net worth exceeding $10 million.

Tax reform is imminent. As we foreshadowed in our May 25 article (“

Likelihood of 2021 Tax Reform Calls for Estate Plan Review

”), on September 12 the U.S. House Ways and Means Committee announced its tax proposal – and it delivers extremely bad news from a gift/estate tax standpoint.

In addition to reducing the gift exemption from $11.7 million to $5 million on January 1, 2022 (unless used before then) and eliminating valuation discounts (except for operating businesses), the proposed tax bill dropped a surprise “bomb” – the elimination of grantor trusts – which, with President Biden’s signature, would abolish virtually every major estate/gift tax planning strategy that exists at that moment.

While there is a chance that this provision could change, the consensus is that it will become law and go into effect immediately.

Opportunity

There is a very short window of opportunity to take action. Gifts and trusts funded before President Biden signs the tax bill into law (which could occur as early as October) enjoy complete “grandfathering,” almost as if the new tax law does not exist. Recognition of this short-term opportunity has sparked a frenzy for wealthy clients and families who seek to take action while there is still time.

If you are vulnerable to the proposed law, you should consider this your “last call” regarding the need to take immediate action. The window could close between October and December, depending on how quickly the legislation advances through the House and Senate.

In anticipation of the proposed tax law changes,

Frazer Ryan’s estate tax planning attorneys

have for several months urged clients to act; in response, many have engaged us to help lock in the $11.7 million gift exemption, using strategies that include making gifts to special types of trusts.

If you have taken a wait-and-see approach, you should assume that the time for waiting is over.


Act now to lock in the $11.7 million gift exemption; call your Frazer Ryan attorney at 602-277-2010.



See also: