With the Georgia Senate seats both going to Democrats, everyone is wondering what will happen to estate, gift, and income taxes now under the new administration. Given that President Biden has everything else on his plate, including an urgent need to address COVID-19 vaccine distribution, there are no promises, but those who know assume there is extensive tax legislation is unlikely until the third quarter.
The normal sequence of new legislation would lead the House Ways & Means Committee to develop proposals, often as part of the budget process. It seems that given the impeachment process, Cabinet assent, and other items that need immediate attention, a markup on a bill may not come until the summer. House approval would then have to be obtained before legislation goes to the Senate.
In the meantime, it’s important to take a look at your balance sheet and consider what your estate tax might look like today and what it might look like in a reverse scenario where the exemption drops back to $ 5 million. If you are concerned about the amount of tax you might pay, it is a good idea to speak to your lawyer or financial advisor about planning strategies to regulate the use of the current $ 11.7 million tax exemption. While there has been much discussion about reducing the amount of exemption, which may be retroactive to Jan. 1, the IRS position on the planned reduction in the exemption in 2026 was that if you use an exemption that is later no longer due, no tax will be payable consists . Regardless of this, estate planners have various strategies available to insure themselves against changes in tax law should a change be made retrospectively as of January 1, 2021.
We continue to encourage free gifts to customers when appropriate and will monitor messages from The Hill to keep abreast of any proposed legislation.