The House Committee on Ways and Means, along with the Senate Finance Committee, recently released their proposed framework for tax reform and it includes an outright repeal of the federal estate tax and generation-skipping transfer tax. In addition repealing the federal estate tax, the proposed legislation would eliminate personal exemptions and a myriad of itemizable deductions. The proposal would also outright repeal the alternative minimum tax, reduce the top individual tax rate to 35 percent down from 39.9 percent, and cut the top tax rate on trade or business income to 25 percent, according to Forbes.

 

What is the Federal Estate Tax?

 

The federal estate tax is only an issue if your individual estate is valued in excess of $5.49 million or if your joint estate is valued over $11 million. If you are in this category, the federal estate tax can take a significant chunk of your estate since it clocks in at 40 percent of your overall estate value. The generation-skipping transfer tax only applies to asset transfers that take place during life or upon death to someone who skips a generation. A prime example is when a grandchild is the “skip person” and the transferor is someone two or more generations above the skip person, according to Investopedia.

 

The tax reform proposal does not include repeal of the gift tax and makes no mention of whether the stepped-up basis policy would remain intact. The stepped-up basis policy allows heirs to revalue assets they receive by bequest which basically enables them to avoid paying capital gains taxes.

 

Not the First Time Congress Has Attempted to Repeal the Estate Tax

 

The U.S. House of Representatives already passed H.R. 631, which is a piece of legislation titled the “Death Tax Repeal Act” in April 2017. The Senate did not take up this bill. However, members of the Senate have their own estate tax repeal legislation – S. 205 titled the Death Tax Repeal Act.

 

Prospects for Estate Tax Repeal

 

Determining whether the estate tax will, in fact, be repealed is anyone’s guess. As mentioned, this is not the first time members of Congress have released proposals that would include the elimination of the federal estate tax, but the tax has remained in effect.

 

Contact an Experienced Renton Estate Planning Attorney

 

As you can see, tax policy that may affect your estate is constantly changing. That is why it makes sense to have the guidance and counsel of an experienced Renton estate planning attorney with the Law Offices of Dan Kellogg PLLC.