Proposed Legislation & Your Money


(Photo | by Kelly Sikkema on Unsplash)

To help raise revenue to pay for President Biden’s Build Back Better Plan, Congress is considering a number of tax law changes, including adjusting estate taxes.

One of the proposals would reduce the estate tax exemption to anywhere between $3.5 and $5 million, with an effective date of January 1, 2022. Another proposal would bring new rules to grantor trusts, including a change to how life insurance held in a trust would be taxed.(1,2)

For now, the federal estate tax exemption remains at $11.7 for 2021, with a married couple having a combined exemption for 2021 of $23.4 million.(3)

But it wouldn’t be a surprise if the estate tax law changed as part of the overall plan. In 2019, 2,570 taxable estate-tax returns were filed, and they owed a combined $13.2 billion. Lowering the estate tax exemption to $5 million would raise an estimated $52.3 billion over five years.(1)

At this point, many ideas are being evaluated, but nothing is final. Corporate tax rates, individual tax rates and capital gains taxes are also on the negotiating table. One of the proposals Congress is considering sets the top rate for taxing capital gains at 25 percent, up from 20 percent under current law. Another would raise the capital gains tax rate to 39.6 percent for taxpayers earning $1 million or more. Still another would make the change to capital gains tax retroactive, with a start date of April 2021.(1,2)

As difficult as it may be, the best approach is to wait-and-see. It would be hasty to make any estate changes based on current discussions.

But if you’re feeling unsettled as Congress continues to work on these changes, please reach out to your trusted advisor. Estate strategies often need adjustments as tax laws change, and it’s best to be prepared for a range of potential new rules coming out of Washington.

(1), September 29, 2021

(2), September 22, 2021

(3), October 25, 2021

Provided by Ed Wettig, CFP, Wettig Capital Management which offers investment management, financial planning and retirement income strategies. Securities, insurance and investment advisory services offered through Royal Alliance Associates, Inc. Member FINRA/SIPC. Wettig Capital Management is a marketing designation.


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Cornerstone Financial Planning Group offers investment management, financial planning and retirement income strategies. Representative is registered with and offers only securities and advisory services through PlanMember Securities Corporation, a registered broker/dealer, investment advisor and member FINRA/SIPC. 6187 Carpinteria Ave, Carpinteria, CA 93013, 800-874-6910. Cornerstone Financial Planning Group and PlanMember Securities Corporation are independently owned and operated. PlanMember is not responsible or liable for ancillary products or services offered by Cornerstone Financial Planning Group or this representative.

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