Moving Forward… Proposed Tax Changes and How They Affect Estate Planning


You may have seen news about possible tax legislation changes that are being considered by Congress as part of the budget resolution process. At this time, it is unclear which of these changes may be enacted, and what the effective dates of such changes would be. However, because it is possible that such changes could significantly impact clients’ estate plans, it is important to be aware of the provisions that are included in the pending legislation.

As of today, there are three significant estate planning provisions on the table: (1) the lowering of the estate, gift and generation-skipping transfer tax lifetime exemption from $11.7 million per person to $5 million per person, indexed for inflation (therefore estimated to be around $6 million in 2022); (2) the inclusion of new (or in some cases, pre-existing) irrevocable “grantor trusts” in the grantor’s gross estate (including spousal limited access trusts, or “SLATs”, and even possibly life insurance trusts); and (3) the loss of traditional valuation discounts for certain non-business assets.

The first and third changes are proposed to become effective on January 1, 2022.  However, the second change relating to grantor trusts is proposed to become effective on the date of enactment of this legislation, which may occur prior to January 1, 2022.

These potential changes are most relevant to clients whose net worth is in excess of $6 million (or, for a married couple, in excess of $12 million), and are comfortable making large irrevocable gifts this year in order to reduce their future estate tax liability, and/or clients who are comfortable making gifts before year-end to new or existing irrevocable grantor trusts. If you think that these possible estate tax changes are relevant to you, we welcome you to contact us right away to review your estate plan and discuss options to address the proposed legislation.