You Snooze, You Lose. Preserve Wealth Before Legislation Eliminates Opportunities

As you know, AAFCPAs anticipated changes on the horizon to the Estate Tax Exemption. On March 25, 2021, Senator Bernie Sanders introduced legislation called “For the 99.5% Act,” which, if passed, would establish a new progressive estate tax rate structure on the top 0.5% of Americans who inherit over $3.5 million in wealth.

It is not yet clear if this proposal will gain traction in Congress, however, AAFCPAs’ Tax Consulting Attorney Joshua England, JD, LLM advises clients to evaluate their estate tax planning strategy now to ensure you take advantage of the current $11,700,000 estate tax exemption.

What’s in the 99.5% Act?

The 99.5% Act proposes a reduction to the estate tax exemption to $3,500,000 and a reduction to the gift tax exemption to $1,000,000. If passed, the Act would not go into effect until January 1, 2022; however; it’s important to note that these changes could be retroactive.

The 99.5% Act proposes other significant changes, including:

  • Increases the tax rate to 45% for estates over $3,500,000
  • Increases the tax rate to 50% for estates over $10,000,000
  • Reduces the annual gift tax exemption to $30,000 per donor for gifts to irrevocable trusts or gifts of interests in flow-through entities

AAFCPAs advises clients to evaluate their estate tax strategy now as the 99.5% Act would eliminate many of our best tools and strategies to preserve wealth. Strategies to consider now while you can include:

  • Sales to trusts that can be disregarded for income tax purposes
  • Gifts to “Grantor Trusts”
  • Gifts to Spousal Lifetime Access Trusts (SLATs)
  • Gifts to Grantor Retained Annuity Trusts (GRATs)
  • Valuation discounts

The current bill provides that these strategies, if put into place before the new law is passed, will be grandfathered so long as they are not added to or altered.

Tools and Strategies Are Still Available Through the End of 2021.

AAFCPAs advises individuals & families with assets in excess of $3.5 million to assess their present planning and take immediate steps as appropriate to avoid or reduce death taxes. If you already have irrevocable trusts in place, you should review the structure to ensure you maximize the effectiveness.

If you have questions about gifting strategies or tax planning, please contact Joshua England, LLM, Esq. at 774.512.4109,; or your AAFCPAs Wealth Advisor.


About the Author

Joshua England, Tax Attorney
Josh is a tax strategist with extensive expertise advising high-net-worth individuals, nonprofits, and business owners and investors on effective strategies to ensure tax efficiency, asset protection, well-executed succession plans, and wealth preservation. He has been practicing law since 2000 and focuses his practice on the areas of wealth transfer planning, fiduciary and individual taxation, business structuring to maximize tax efficiency, and advising tax-exempt organizations, foundations and charitable donors.