Senator Bernie Sanders recently introduced a new bill proposing to make extensive changes to the current wealth transfer tax laws under the Internal Revenue Code (IRC). As submitted, the bill is titled For the 99.5 Percent Act (“Act”). Generally, for bills to pass in the Senate they are subject to filibuster and a 60 vote requirement – a rather high bar in the political environment we live in today. However, with the budget reconciliation process a bill may be brought for a vote with a simple majority (51 votes). With an evenly divided 50-50 Senate between Democrats and Republicans, Vice President Kamala Harris would put the Democrats in a position to pass a bill without any need for support from a Senate Republican.
While details of the budget reconciliation process is outside the scope of this article, it’s important to note its significance because the impact is to increase exponentially the likelihood of Senator Sanders’ proposals not only becoming law but also taking effect this year in 2021. If passed in its existing form without changes the Act could upend the world of estate planning as we’ve known it for the last few decades.
There are numerous areas of the wealth transfer tax laws that is in Sanders’ crosshairs, the consequence of which is to effectively eliminate common planning strategies used every day by estate planners, or at least severely limit those techniques. Indeed, it is appropriately titled “for the 99.5 percent.” Since the Act is not yet law, this article seeks to provide a high level review of some of the most drastic changes made by the proposals as currently drafted.
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