Browse Our
  • Cash Flow and Retirement
    Clear Topic Cash Flow and Retirement
  • Financial Planning
    Clear Topic Financial Planning
  • Annuities
    Clear Topic Annuities
  • Business Solutions
    Clear Topic Business Solutions
  • Umbrella Liability Insurance
    Clear Topic Umbrella Liability Insurance
  • Education Funding
    Clear Topic Education Funding
  • Disability Income Insurance
    Clear Topic Disability Income Insurance
  • Employee Benefits
    Clear Topic Employee Benefits
  • Estate, Gift, & Trust Planning
    Clear Topic Estate, Gift, & Trust Planning
  • Life Insurance
    Clear Topic Life Insurance
  • Executive Benefits
    Clear Topic Executive Benefits
  • Property and Casualty Insurance
    Clear Topic Property and Casualty Insurance
  • Investment and Asset Management
    Clear Topic Investment and Asset Management
  • Long Term Care Insurance
    Clear Topic Long Term Care Insurance
  • Blog
  • In the News
    Clear Topic In the News
  • Latest Insights
    Possible Estate Tax Implications of Proposed Legislation

    Possible Estate Tax Implications of Proposed Legislation

    Estate, Gift, & Trust Planning

    The U.S. Senate introduced two pieces of legislation this year: The “For the 99.5% Act” and the “Sensible Taxation and Equity Promotion (STEP) Act.” These acts are particularly consequential in that they would transformatively alter the transfer tax regimes. It is still unknown which, if any, provisions in these acts will become law; however, it is crucial to be aware that these acts contain the following proposals, which could change the estate planning landscape in unexpected and major ways.

    Some of the most substantial provisions of the 99.5% Act and STEP Act are as follows:

    • Federal estate tax exemption reduced from $11.7 million to $3.5 million
    • Gift tax exemption reduced from $11.7 million to $1 million
    • Increase in estate and gift tax rates from 40% to up to 65%
    • Reduce the annual exclusion gift from $15,000 per donee to $10,000 per donee
    • Total annual limit of $20,000 of annual exclusion gifts per donor
    • Limit generation-skipping trusts to a 50-year period
    • Impose GST tax on current GST trusts every 50 years
    • Dramatically reduce, if not wholly eliminate, discounted valuations of closely held business interests gifted or sold to family members and/or irrevocable trusts
    • Include Grantor Trusts (IDGTs, such as Life Insurance Trusts) as part of the grantor's taxable estate at death, thereby eliminating many common estate planning strategies to remove assets from the donor's taxable
    • Disallow a step-up in basis for assets held in IDGTs that are not includable in the grantor's estate at death
    • Reduce the effectiveness of Grantor Retained Annuity Trusts (GRATs) by requiring a 10-year minimum period and prohibiting the use of "zeroed-out GRATs"*
    • Tax unrealized capital gain in non-grantor trusts every 21 years, beginning in 2026
    • Increase the capital gains tax rate from 20% to 39%
    • Eliminate the carryover basis of gifts and impose capital gains tax on built-in gain of all gifted property, subject to a $100,000 lifetime exclusion
    • Eliminate the step-up basis at death and impose income tax on all built-in gain of property transferred at death, subject to a $1 million exclusion.

    This is not meant to be an exhaustive or otherwise comprehensive list. We aim to highlight key components of the acts that would most impact our clients. While these proposals are not yet law, we recommend you reach out to your Lenox Advisor to discuss whether you might benefit from planning ahead in anticipation of any potential changes to the federal estate and gift tax laws.

    *Note: The proposed legislation currently allows for "grandfathering" of preexisting, fully funded GRATs.

    The information provided is not written or intended as specific tax or legal advice. Our employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. CRN202304-281600