The United States started taxing assets at death by enacting the Stamp Act in 1797. In subsequent years, the new government used estate taxes sporadically to finance wars. But after World War I, the U.S. didn’t repeal the tax – instead choosing to increase rates and introducing the gift tax in 1924. Since then, rates have fluctuated with:
- The highest federal tax rate 77% on estates more than $10 million from 1941 to 1977
- The highest gift tax rate 70% for lifetime gifts more than $5 million from 1977 to 1981
President Trump’s and Congressional tax plans both provide for the abolishment of estate taxes. While it’s not clear if the elimination would be immediate or completed in phases, what are some of the potential consequences of the repeal?
Possible tax reform consequences:
- In states that piggyback off federal estate tax laws, the repeal would effectively eliminate the state’s estate tax
- There could be significant growth in generation-skipping trusts to be grandfathered in case of reinstatement
- Clients should restructure estate-tax-driven techniques that are no longer beneficial
- There could a be a reduction in tax-driven charitable bequests
Experts expect a tax bill signed into law by early 2018, and AR&H attorney Jeffrey Vollman recommends playing close attention to the timing and details of the bill.
“The estate tax repeal and other tax code changes could significantly impact your current estate plans,” Vollman says. “This is good time to review strategies with an attorney to ensure you’re maximizing the extent of the law.”