As coverage of the 2020 presidential election increases, have you heard about the new proposed estate tax exemption?
Recently, Senator Bernie Sanders of the Democratic party introduced a bill titled “For the 99.8 Percent Act.” This Act proposes a reduction of the estate tax exemption, as well as various other limitations on popular estate planning techniques. Additionally, Senator Elizabeth Warren and Senator Cory Booker each proposed legislation that calls for higher estate tax rates. To help you learn more about the proposed changes and to evaluate whether your estate may be impacted, let us share with you some information about the new proposed estate and wealth taxes.
Senator Sanders’s Estate Tax Proposal
Senator Sanders’s proposal under the “For the 99.8 Percent Act” would create a “graduated rate structure for the estates of the very rich, topping out at a maximum rate of 77 percent.” This is different to the current estate tax law in the United States, under which the more affluent single persons may leave up to $11.4 million untaxed to their heirs, with married persons able to protect $22.8 million.
The proposed Act would tax the largest of estates according to a multi-tiered structure, placing estates in brackets. The Act creates a “45 percent bracket from $3.5 million to $10 million, a 50 percent bracket from $10 million to $50 million, a 55 percent bracket on wealth from $50 million to $1 billion, and a 77 percent rate on wealth over $1 billion.” If your estate falls into one of the above listed brackets, your estate may be affected by these changes and is something we should discuss sooner rather than later.
Senator Warren’s & Senator Booker’s Proposals
With regard to wealth taxes, Senator Warren’s proposal would create a “progressive wealth tax with a rate of two percent on wealth over $50 million and a three percent rate on wealth over $1 billion.” Notably, this rate would be levied on wealth, not income, and if passed, has the potential to impact the wealthiest Americans more than high income or estate taxes.
Similarly, Senator Cory Booker has proposed a 65 percent estate tax rate, a higher capital gains tax rate, and encourages the process of applying capital gains taxes to assets held at death. If implemented, this would be the highest estate tax rate imposed since 1982, and could substantially impact your estate.
One thing each of these proposals have in common is that each proposal is targeted toward the wealthiest Americans. As a result, they may have significant implications for your estate and the legacy you wish to create for your loved ones. Remember that, although these proposals have not yet been adopted as law, it is important to be aware of proposed changes that may impact you and your loved ones. If you have questions or concerns about anything raised in this article, or other estate planning related questions, we encourage you to reach out to our office.