Client Alert: Time May Be Running Out for Estate Tax Saving Opportunities

Estate Planning in the third quarter of 2021 is driven by the advance in Congress of legislation that would substantially curtail some of the most powerful techniques for reducing gift and estate taxes. This legislation would need to pass through the Congressional reconciliation process. This Client Alert written by Partner Michael D. Whitty provides information on three hot topics: 

1. House Issues Proposed Tax Legislation: The US House Ways and Means Committee majority issued a summary of its proposed tax legislation. A few provisions carry an effective date of September 13, 2021, the date the report was issued, but most provisions have an effective date of January 2022 or later. This Bulletin includes a summary of the major changes proposed by the House.

2. Fourth Quarter of 2021 Will Likely Be Last Opportunity to Use Certain Powerful Estate Tax Savings Techniques: The House proposals target several powerful estate tax savings techniques, and would prohibit or effectively eliminate several as of the date of enactment, including completed gift grantor trusts and valuation discounts for transfers of family-owned entities. Other major changes would occur as of the end of 2021, including halving of the exemptions for gift tax, estate tax, and generation-skipping transfer tax (“GST Tax”).

3. Limited Estate Tax Savings Techniques After Legislation Becomes Effective: Once legislation resembling the House proposals becomes effective, many of our most powerful and popular estate and gift tax savings techniques will be eviscerated, if not eliminated. There will still be some techniques that remain available, but those will not be as powerful.