Content Expert: Accounting

Although the estate tax law changes proposed in 2021 ultimately did not pass, or get included in the most recent Build Back Better plan, it’s possible that these proposals could be on the table sometime in the future.
In September 2021, proposed legislation was introduced that would reduce the “doubled” estate, gift and generation-skipping tax exemption for years after December 31, 2021 to $5 million, adjusted for inflation. This would have ultimately accelerated the current estate tax exemption, which is set to expire after December 31, 2025. Notable other changes included:

1. The proposed legislation would make assets of a grantor trust includible in a decedent’s estate. This would have impacted certain grantor trusts created after the date of enactment or trusts that were created prior to enactment and received contributions and/or additions to the trust post enactment.
2. The proposed legislation would have allowed valuation discounts for gifts of business interest to be applied only to operating businesses. Nonbusiness assets held in such entities, such as marketable securities, would not get any advantage from the discount.

Although these changes would have been significant had they passed, it’s interesting to note that there was no proposal to change the portability of an unused exemption from a deceased spouse to a surviving spouse. Currently, if a spouse passes away, an estate tax return can be filed that transfers the deceased spouse’s unused exemption to the surviving spouse. This allows the surviving spouse to take advantage of the deceased spouse’s unused estate tax exemption and would shield additional assets from potentially being subjected to estate taxes upon the surviving spouse’s death. This may be even more important as the current estate tax exemption is set to sunset or be reduced by law.

As uncertainty on legislation persists, it’s even more important to review your current estate plan to ensure all your applicable documents are up to date and consider any planning that may need to take place before any change in law occurs. Reviewing your plan personally, or with the advisor of your choosing, on an annual basis can ensure that you’re maximizing the use of any estate, gift and generation-skipping tax exemption while considering potential future law changes.

MEET THE EXPERT
Michael Andrews, CPA, ABV is a Senior Manager in Warren Averett’s Estate and Trust Division. He specializes in estates, trusts and income tax compliance and planning. He is also involved in entity planning and providing valuation services for estate planning purposes. Contact him at 334-260-2443 or Michael.Andrews@warrenaverett.com.