Request a Meeting

Request a Meeting

Dodging Bullets: The Latest Estate Tax News

Annie Rogers

Christina Knopke

On the heels of the most recent updates to the Build Back Better Act (say that five times fast), Attorneys Chrissy Knopke and Annie Rogers discuss which estate tax proposals from September’s iteration of the bill are no longer included and how it affects estate planning for high-net-worth individuals.

Read more about the latest tax proposals: https://creativeplanning.com/insights/important-updates-to-president-bidens-tax-plan/

A Matter of Trust, hosted by Creative Planning Attorneys Annie Rogers and Christina Knopke, is a thoughtful, informed discussion about ideas, trends and developments in estate planning. Our mission is to educate and inspire people to make better financial choices through knowledge, tools and strategies that ensure a more prosperous future.

Have questions or topic suggestions? 

Email us @ [email protected]

 

Chrissy Knopke: Welcome to Creative Planning’s A Matter of Trust. I’m Chrissy Knopke and I’m here with my friend and colleague, Annie Rogers. We’re both estate planning attorneys here at Creative Planning and we are going to talk to you today about the Building Back Better Act and how we feel like we may be coming out way better than we thought on this.

Annie Rogers: Right. So we previously did a podcast that was going to air and everything’s changed since then so we’re giving you an update.

Chrissy: It was a pretty Debbie Downer podcast about how all these laws were changing and going to affect people that we’re doing estate planning, kind of for the worst. And thankfully, we kind of get to rerecord this and have a little bit more positive spin on it.

Annie: We’ve dodged some bullets, I think, so far.

Chrissy: So, it looks like some of the things that we thought were going to be in the bill may not make it into the final bill.

And again, it’s a big maybe because me and Annie do not have a crystal ball, but one of the biggest concerns out there was the federal tax exemption level lowering from $11.7 million to around $6 million on January 1, 2022, which was forcing high-net-worth clients to speed up advanced planning and gifting out of their estates.

Annie: To try to maximize the greater exemption.

Chrissy: And right now it doesn’t look like that’s going to make it. And so we have a little bit more time to deal with those gifting concerns because we do know it will sunset at the end of 2025. So as of January 1, 2026, it will be the lower exemption. But if it doesn’t make it back into the…

Annie: Build Back Better Act, it’s a tongue twister.

Chrissy: Then we are good.

Annie: The next thing is that we thought that one of the things that might make it in there was the step-up in basis for capital gain purposes was going to get eliminated, which has been huge.

Because, as of right now, if you inherit money from your family member, you get the date of death value for capital gain purposes. It eliminates all that appreciation for the day that you take title to the property. And so we’re still able to do that. That did not make it into this bill. Obviously all these things are items that could be on the chopping block at some point, but for now we think we’re also safe on that front.

Chrissy: The other concern that we had talked about in our previous podcast was people who were doing advanced planning; they may have taken away the right for them to have grantor trusts when they were doing gifting, which would essentially complicate when they gifted. Now the people they’re gifting to, they wouldn’t be able to…

Annie: …Pay the taxes on it. The way it is right now is that on many irrevocable trusts, the person who created the trust, the grantor, can gift whatever they fund into that trust; but then they can also pay the taxes on it as if it’s theirs. And that was one of the things that the Build Back Better Act was trying to eliminate so that the irrevocable trust would then have to pay their own taxes and be a non-grantor trust. Because the language that was in this bill was that if those trusts were considered grantor trusts, they would cause a estate tax inclusion. So, that’s a pretty powerful tool to be able to gift more assets by paying the taxes as well as making the gift. And for now we can still do that. So any ones that were already in effect we thought were going to be grandfathered in anyway that were created and funded previously, but we were kind of in a race to try to do some more of that before the end of the year. And I think that some of that…

Chrissy: Is unnecessary now. And so, Annie and I, as of recording today, we’re feeling like we dodged a bullet, but we could be re-recording this because, again, none of this is final.

Annie: So, until this bill gets signed…

Chrissy: It’s evolving every day. And thank you for joining us.

Disclosure: This commentary is provided for general information purposes only, and should not be construed as investment, tax, or legal advice. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable, but is not guaranteed. This commentary and the information provided may be considered advertising in some jurisdictions under the applicable law and ethical rules. The determination of the need for legal services and the choice of a lawyer are extremely important decisions and should not be based solely upon advertisements or self-proclaimed expertise. No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers.

Let’s Talk

Find out how Creative Planning can help you maximize your wealth.

More Episodes

Coping With Inflation

This month, Peter Mallouk and Jonathan Clements discuss inflation’s effect on everything from bonds to home prices and what actions you should — and should not — take to potentially mitigate your risk.

Hear more on inflation here: https://creativeplanning.com/podcast/37-episode-37-the-potential-recession-the-personal-impact-of-inflation-and-the-role-of-bonds-in-your-portfolio/

Taxation on Investment Income Explained

Let Tax Directors Candace Varner and Ben Hake help you avoid surprises on Tax Day! Listen as they discuss the ins and outs of taxation on many common types of investment income (including interest income, capital gains distributions and several types of dividends) as well as the importance — and timing — of K-1s.

“Your wealth works harder when it works together.”

Peter Mallouk

President & CEO, Creative Planning

Serving Clients Nationwide

50

STATES & ABROAD

Providing financial peace of mind across the globe

$225

BILLION

Combined assets under management & advisement as of December 31, 2021