For wealthy families (definition see below), there was a good news in 2012 - the new law passed in 2012 extended the large exclusion amount as well as kept the top rate a moderate 40%.
But based on the latest Obama 2014 Budget Plan, it appears that some changes are forthcoming, and those are not good news for the impacted families.
In very broad terms, here's what's included in the budget proposal:
The impact on grantor trusts
Unfortunately, that's not the end of the story.
In addition to changing rates, there are elements of the budget that directly attack one of the tools that has been used for estate planning for decades: Grantor Trusts.
The primary target is the idea of estate "freezes".
Specifically, the proposed budget calls for inclusion, for estate and gift tax purposes, of any assets that are sold to a grantor trust or exchanged for existing trust assets.
Further, any growth of the trust that is attributable to those assets would also be included for estate and gift tax purposes - bad news for many wealthy families.
GRAT changes
There are also changes aimed at GRATs, including a minimum term of ten years.
This analysis from wealthmanagement is a good read if you want to know some details.
Other changes
The budget also proposes other items such as basis consistency, the forced liquidation of retirement accounts after five years for non-spouse beneficiaries, limitations to duration of generation skipping trusts, etc.
But based on the latest Obama 2014 Budget Plan, it appears that some changes are forthcoming, and those are not good news for the impacted families.
In very broad terms, here's what's included in the budget proposal:
- Increase in the top rate from 40% to 45%
- Rollback of the exclusion amount from the current $5MM to $3.5MM
- Elimination of the indexing for inflation
The impact on grantor trusts
Unfortunately, that's not the end of the story.
In addition to changing rates, there are elements of the budget that directly attack one of the tools that has been used for estate planning for decades: Grantor Trusts.
The primary target is the idea of estate "freezes".
Specifically, the proposed budget calls for inclusion, for estate and gift tax purposes, of any assets that are sold to a grantor trust or exchanged for existing trust assets.
Further, any growth of the trust that is attributable to those assets would also be included for estate and gift tax purposes - bad news for many wealthy families.
GRAT changes
There are also changes aimed at GRATs, including a minimum term of ten years.
This analysis from wealthmanagement is a good read if you want to know some details.
Other changes
The budget also proposes other items such as basis consistency, the forced liquidation of retirement accounts after five years for non-spouse beneficiaries, limitations to duration of generation skipping trusts, etc.
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