DEAR TRUST OFFICER:
I understand that the $13.99 million exemption from the federal estate and gift tax gets cut in half at the end of this year. Will this really happen? Should I be doing something about my estate plan?—WATCHING CONGRESS
DEAR WATCHING:
Your understanding is correct. Congress has scheduled reductions in the estate tax exemption before, and every time the action has been reversed before it was implemented. This time could be different.
However, with the Republicans holding both the House and Senate, and given that the Senate Majority Leader, John Thune, has in the past advocated the total repeal of the federal estate tax, there is a good chance that the current exemption amount will be renewed, according to many tax observers.
You will get an early clue to the outcome of the tax debate in the coming fight over how the federal budget is to be scored this year. Should the baseline be scored under current policy, or under current law? The difference is that under current law a portion the 2017 tax reform expires, which constitutes a future tax increase worth an estimated $4.6 trillion. Under a current policy analysis, cancelling a future tax increase has no effect on budgets, we just keep doing what we are doing.
If the latter view prevails, it is likely that the larger estate tax exemption will be saved. But either way, you should review your estate plans this year if they are several years old. There are many factors other than taxes that may call for estate plan amendment.
As a wise man once said, predictions are hard, especially about the future.
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