To start off, I want to be clear that we as a firm are not endorsing either candidate in this year's presidential election. This is not meant to be a political post.
In the area of estate and business planning, change is always the name of the game. You can be sure that we will keep a close watch on developments and be ready to help our clients adjust their estate and/or business plans.
Kamala Harris recently endorsed a bill previously proposed by Senator Elizabeth Warren, known as the American Housing and Economic Mobility Act. As the bill looks like it may gain some traction, estate planning professionals are keeping a close eye on its potential implications. This bill has been around for years but so far has not had the votes needed to pass. Whether it will pass in its current form or in any recognizable form is not something we can predict. Since it has significant potential to reshape the landscape of estate taxation and we have noticed an uptick in news articles about it, we thought it would be good to share an overview of the Act with our clients.
What is the American Housing and Economic Mobility Act?
Senator Warren's American Housing and Economic Mobility Act is a comprehensive piece of legislation designed to tackle some of the most pressing issues facing American families today. Its core focus is to increase the availability of affordable housing and promote economic mobility, particularly among low- and middle-income households. However, beyond its primary goals, the act also includes several provisions that could significantly influence estate planning strategies which is how the proposed Act is supposed to be funded.
Below are just a few highlights of the Act:
- Estates worth over $3.5 million would be taxed at rates beginning at 55% and climbing to 60% or even 65% depending on the amount being transferred. The first $3.5 million would still not be taxed, only the amount over $3.5 million.
- The types of trusts currently used to reduce or eliminate estate taxes may be less effective so current trusts may need to be modified.
- Eliminate some of the more popular discounting strategies in the inheritance of family-owned businesses.
- Reduce the annual gift tax exclusion to $10,000 per person you are gifting to (currently $18,000) and cap the annual amount a person can gift tax-free to $20,000 (currently no limit).
How Should You Prepare?
Now might be the time to consider making gifts and some updating your estate plan if you are concerned about the potential changes. We send out regular newsletters to our clients and would also send additional letters and notices if a major federal or state act passed, such as this one, which would have the potential to massively change the estate planning landscape. That said, as with most pieces of legislation, it is very unlikely to pass in its current form and there will likely be significant changes if and when the Act actually moves forward. If it passes in any form, there will likely be a period of time before it takes effect in which we can help our clients adjust their estate plans.
In conclusion, Senator Warren's American Housing and Economic Mobility Act represents a significant shift in federal policy with far-reaching implications for estate planning. By potentially lowering estate tax exemptions and significantly reducing the effectiveness of current tax-planning strategies, the Act could fundamentally alter how estates are managed and taxed. As always, we will be preparing for these changes by staying informed and advising clients on strategies to adapt to new laws. Working closely with experienced estate planning advisors like our team at Stratton & Reynolds will be key to successfully navigating these potential changes and making sure your plan accomplishes your family's goals.
In an election year, even more than usual, change is constant. Stay tuned to our blog for the latest updates and insights on how new legislation could impact your estate planning strategy. If you have questions or concerns about any changes in estate or business law, call us today at 803-358-7214 or compete our contact form to schedule your time with one of our experienced attorneys.
