As we wait to see if Congress can pass a tax bill, we now know that estate taxes for the very wealthy will not be repealed immediately or at all. The House bill that was passed yesterday bumps the lifetime exemption to $10 million indexed for inflation and retains the estate tax through 2023. The Senate bill, which is still being debated, doubles the existing lifetime exemption and retains the estate tax indefinitely. It is important to understand that since 60 votes was impossible in the Senate, a bill will have to be passed through reconciliation. This means it will be subject to sunset in ten years, so Congress would have to act to make it permanent. If not, the law will revert to the way it was before the bill was enacted into law.
But any bill may have a much shorter life. Polls show the bills are extremely unpopular. Polls also show historic unpopularity for the President and the Republican Congress. Accordingly, there is a significant possibility that any tax bill would be partially or completely undone by the next Administration and Congress.
Accordingly, if a tax bill is enacted into law, wealthy individuals would be wise to consider taking advantage of the increased exemption amounts by making gifts next year. As previously noted on this blog, discount planning is alive and well again. So leveraging the large exemption to migrate wealth downstream presents a compelling opportunity. This is particularly so when transfers are made to perpetual dynastic trusts. Next year may be a very busy year.
