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Estate and Tax Planning Update – Nov. 19, 2021

November 19, 2021

By: M. David Stallings

This morning the House passed the latest version of President Biden’s $2 trillion social spending and climate package today, also known as the Build Back Better Act, but the threat of massive tax overhauls to popular trust and estate planning strategies seems to have subsided as negotiations appear headed to the Senate for a further round of edits. 

It is safe to assume that some version of this bill winds up on the President’s desk for signature, but what appears to have been dropped from the original is really the key takeaway.   Here are some of the highlights at the individual level:

  • No change to the estate and gift tax exemption (currently $11.7 million for individuals and $23.4 million for married couples).
  • Similarly, no change to the generation skipping transfer tax exemption of $11.7 million per individual.
  • The step-up in cost basis at death remains intact for estate assets.
  • No increased rates in capital gains tax for taxpayers with income below $10 million.
  • Ordinary income tax rates for taxpayers with income below $10 million will not be affected.
  • Contributions to grantor trusts, including irrevocable life insurance trusts, will not cause the trust assets to be includable in the gross taxable estate of the grantor.
  • Proposed Increases in deductions for state and local real estate (SALT) taxes.

The spending package is obviously still a work in progress, with most of the changes set to affect large corporations and the ultra-wealthy, but these latest developments will certainly be welcome news to most individual taxpayers.