Estate Tax Reform
Both chambers of Congress have recently introduced broad tax reform measures that, among sweeping changes to income tax rules, include significant changes to the current estate, gift, and generation-skipping transfer tax system.
On Thursday, November 2, the “Tax Cuts and Jobs Act” bill was introduced in the U.S. House, and the Senate offered their version of the same named bill on Thursday, November 9. Only the House version goes so far as to propose complete repeal of the estate and generation-skipping transfer tax starting in 2024, but both versions propose to double the amount an individual may transfer to heirs free of federal estate tax. However, in the Senate version of the bill, this provision would sunset after 2025, and that exemption amount would revert to the pre-reform level.
The below table offers a summary of current law and the House and Senate proposals.
| Current | House | Senate |
Estate/Generation-skipping transfer tax / Gift tax exemptions | $5,600,000 per person for 2018 (inflation adjusted) | $11,200,000 per person for 2018 (inflation adjusted) | $11,200,000 per person for 2018 (inflation adjusted) |
Tax rate | 40% | 35% | 40% |
Repeal |
| Estate and GST tax repealed for decedents dying after 12/31/2023; gift tax remains intact | No |
Permanence of reform |
| Permanent | Sunsets tax cuts on 12/31/2025; exemptions return to pre-reform level |
On Thursday, November 16, the House easily passed their version of the bill. The Senate hopes to put their version of the bill to a vote this week, but since Republicans hold only a two-seat majority in the Senate, the bill is not expected to pass as easily as it did in the House. If the Senate manages to pass its version, the differences in the bills will be hammered out in conference committee until a new version emerges, which may be passed by both chambers.
It is likely that the proposed legislation will still undergo meaningful revisions before it is passed, but there is no way to predict what form those revisions will take. As always, it is important to carefully consider your long-term estate planning goals and objectives, and talk to your advisors about what actions you should be taking today.
