Senate Tax Bill - Estate Tax, Part I – A Whole Lot o’ Nuttin’ (almost)

Although the Senate and House versions of the sweeping 2017 tax law changes need to be reconciled prior to sending the bill to the President’s desk, the Senate version of the 2017 tax legislation, approved last night by a 51-49 vote (Senator Corker of Tennessee the lone Republican to stand up to his party), increases the estate tax exemption (and also the Generation Skipping Tax exemption) from $5,490,000 per taxpayer to $10,000,000, starting in 2018, and then indexed for inflation.

To the vast majority of Americans, this means nothing and may well have no effect on their estate planning.

According to the Tax Policy Center, in 2017, 11,300 federal estate tax returns will be filed, and 5,500 of these will report a tax due. About 2,600,000 people die in the US annually. Thus, fewer than ½ of 1% of decedents filed a federal estate tax return and only about 2/10ths of 1% owed estate tax. For those who will have no federal estate tax liability (at least in states that have no gift tax, such as Massachusetts) there is effectively no transfer tax limit on gifting.

With an increase in the federal estate tax threshold, it is expected that the number of estates that have to file federal estate tax returns and those that report tax due, will be halved. For that 1/10th of 1% the exemption increase is good news, and would reduce tax by as much as $2,000,000 (40% of $5,000,000). But for everyone else, it don’t mean much.

See Part II of this blog entry and stay tuned for updates to this blog entry once the law is enacted..

This blog is not intended to constitute, and does not constitute, legal advise to anyone or any specific situation. The content of these blogs is my view only. See also our legal notices.