Possible Estate Tax Repeal Still Uncertain
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Type: Law Bulletins Date: 02/06/2017
Many interested observers have been following the possible repeal of the federal estate tax (and related transfer taxes) since the 2016 election, which saw the rise of a president who has pledged to eliminate the tax and the retention of a Congress that has also favored repeal.
Here is where the situation stands as of Feb. 1:
- Has the estate tax been repealed? No. For now, the law remains the same as in prior years. For 2017, only estates above $5,490,000 (effectively double that for married couples) are subject to the tax.
- What are the chances for repeal? Uncertain. An act of Congress, signed by the president, would be required. That could come as part of the annual budget process this spring or within a larger tax overhaul. While we can try to read the tea leaves, it is impossible to say at this point how high a legislative priority repeal is for the government or how other events could impact the legislative process.
- What happens if the estate tax is repealed? There are a few possibilities. Families with large estates would benefit from the elimination of the estate tax liability that would otherwise be owed. Repeal could be permanent or temporary — just a few years ago in 2010, the estate tax was repealed for one year only under a tax act that expired by its own terms, but by the same law, the tax returned to full effect in 2011. Even a permanent repeal could also include a new tax or take away other tax benefits. For example, there is a current proposal that would eliminate the estate tax but also raise revenue by linking inherited property to capital gains, so that capital gains tax would be paid at death.
- What should I do? Taft estate planners are ready to consult with clients on how a possible repeal could affect existing estates and trusts. We will be watching and responding to how this situation unfolds at the federal level.
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