“I wouldn’t make any big moves in a client account until the final ink is dry,” said Dana D’Auria, co-chief investment officer at Envestnet. “We know the package probably gets cut back. You could have last-minute amendments that change the picture.”
Estate-and-Gift Tax
When it comes to planning to avoid the estate-and-gift tax, however, tax advisers are urging clients not to be complacent. The House legislation would take the lifetime exemption—the amount that can be transferred to heirs tax-free, currently $23.4 million for married couples—and cut it in half. Even more disruptive for wealthy families is that the bill targets most of the ways they can avoid the estate tax entirely, by funneling millions and billions of dollars more to heirs tax-free.
In the House bill, the new rules only apply to trusts “created on or after the date” the bill becomes law. The lifetime exemption would drop after Dec. 31. That gives the wealthy a shrinking opportunity to move as much of their fortune to heirs now as possible. It’s a strategy estate planners have been urging on their clients for the past couple of years, as it looked like Democrats might re-take control of Washington. If Congress does nothing this year, the lifetime exemption is still slated to drop at the end of 2025.
Even if rich people aren’t sure of exactly what to do, advisers say they’re telling clients to set up trusts and get other paperwork ready. If major changes are implemented at the end of the year or even earlier, the country’s estate tax experts simply won’t have time to help every wealthy person react in time.
“We’re going to be horrendously busy from now to the end of the year,” said Richard Levine, special counsel in the private client and tax team at Withers law firm. “This is why I’ve been screaming at all my clients: ‘You should have done this over the summer. I know you didn’t like the idea of paying legal fees in an era of uncertainty. But now we’re all going to be so overwhelmed.’”
—With assistance from Laura Davison.
This article was provided by Bloomberg News.