Wealth Shifting Tax Legislation is on the Political Agenda for the 2020 Elections

Recently, presidential contenders have proposed tax initiatives that, if enacted, would have a major impact on current estate planning strategies.

Sen. Elizabeth Warren has proposed the “Ultra- Millionaire Tax” (UMT).  The UMT would be an annual tax of 2% on “household net worth between $50 million and $1billion, and a 1% annual additional tax on net worth over $1 billion (That is 3% on net worth above $1 billion). 

Sen. Bernie Sanders is offering a bill entitled “For the 99.8 Percent Act” (99.8 Act) making significant changes to the current estate tax laws.  The theory is the bill would only be impacting the wealthiest .02 percent of Americans. The bill would return the gift tax exclusion to $1 million and the estate tax exclusion to $3.5 million.

In addition, the 99.8 Act would change the estate tax structure to make it more progressive.  A tax rate of 45% would apply to taxable assets over $3.5 million and up to $10 million—with further rate increases as noted below.

Taxable Assets Tax Rate
$10 to $50 million 50%
Over $50 million 55%
Over $1 billion 77%




The bill contains several provisions diminishing the ability to take advantage of sophisticated planning techniques.  Examples include valuation discounts for transfers of entities with interests in non-business assets, Grantor retained annuity trusts, sales to defective grantor trusts and generation-skipping transfer tax arrangements.  These techniques are currently available to leverage and maximize the tax benefits of transfer strategies.

The bill would also limit the use of the annual gift tax exclusion (currently $15,000 per donee) for transfers to trusts and various other entities.  This appears primarily targeted at partnerships and limited liability companies.

These early proposals are not likely to pass unless there is a change in control of the White House, Senate and House after 2020.  However, if momentum builds for such legislation, the very taxpayer friendly current estate and gift tax environment could quickly change.   For those considering reviewing their plans or have intentions of transferring assets to family members now may be the best time to act.  The $10+ million gift and estate tax exclusion may not be here for as long as you think; and many of the best strategies for gift and business transition planning may be dismantled or annihilated.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.

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