Houston Families Should Note Estate Planning Under Fire With Obama Budget Proposal

MP900382668Under the President’s plan, in 2018 the tax would revert to the rates that were in effect in 2009.

Budget buzz is spreading across Capitol Hill. For example, did you know that President Obama's proposed budget is seeking a reduction of the estate tax exemption back to $3.5 million?

Just when taxpayers and estate planning attorneys thought the estate tax exemption level had become settled law (except for inflation increases), President Obama would like to throw a monkey wrench into estate plans past, present and future. In addition, he would like to double down on some traditional estate planning techniques, too.

For some expert analysis on what this could mean to you, be sure to read a recent Forbes article titled “Obama Budget Takes Aim At Popular Wealth Transfer Tools.” You see, the last budget battle gave a huge boon to wealth transfer and estate planning in the form of ATRA or the American Taxpayer Relief Act. The estate tax – greatest and most direct of all transfer-tax barometers – was set to allow individuals to exclude up to $5.34 million and transfer this freely without the dreaded tax. Amounts above that threshold would be taxed at up to 40%.

President Obama’s proposal as found in The Green Book drops the exclusion and kicks up the applicable rate, offering 2009 level figures with an exclusion amount of $3.5 million and top rate of up to 45%. But that is not all.

In addition to lowering the exemption and raising the tax rate, the Forbes article identifies many targets, some old and some new, including laws relating to or supporting annual gifts to trusts, GRATs, dynasty trusts, and regular grantor trusts.

For now, anyway, it is important to understand that these proposals are presently political proposals and not legal realities. That is the case for now, at least. Nevertheless, the contents of The Green Book provide a foretaste of what the administration would like to cook up for the fewer remaining Americans who are taxpayers.

For more information and estate planning and estate tax exemptions in Houston, please visit my website.

Reference: Forbes (March 4, 2014) “Obama Budget Takes Aim At Popular Wealth Transfer Tools


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