Bernie Sanders Proposes Extreme Estate Tax on Billionaires

According to a statement, Sanders’s proposed plan would set a 45% tax on the value of estates between $3.5 million and $10 million, with the rate increasing so that amounts greater than $1 billion would be taxed at a rate of 77%.  Meanwhile, some Senate Republicans seek to repeal the estate tax entirely.

The current approximately $11 million estate and gift tax exemption per person has risen from $650,000 per person 20 years ago.\

Davis, Laura and Arit John. Sanders Proposes Estate Tax of Up to 77 Percent for Billionaires. Bloomberg Law. Feb. 1, 2019

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House GOP Tax Cuts and Job Act Repeals Estate and GST Taxes; No Change to Retirement Accounts

The Act repeals both the estate and GST taxes for decedents dying and generation skipping transfers occurring after December 31, 2023.  In the meantime, beginning January 1, 2018, the basic exclusion amount will be increased to $10 million, adjusted for inflation.

The Act keeps the Internal Revenue Code § 1014 step up in basis at death intact.

Further, all individual beneficiaries of IRAs, not just surviving spouses, will still have the ability to stretch the payout of inherited IRAs over their life expectancies.

Note that the Act will evolve before becoming final, if ever.  Stay tuned for future changes.

For a more detailed briefing, read the WealthCounsel Insight Brief here.

How Trump’s Tax Proposal Affects You

  1. Both the estate and generation skipping taxes get the boot.
  2. What about stepped up basis under I.R.C. § 1014?  I.R.C. § 1014 provides that, for most property, a decedent’s beneficiaries receive a step up in basis to fair market value at the decedent’s date of death.  Thus far, the proposed changes don’t affect I.R.C. §1014.
  3. Regarding retirement, the proposal states, “Tax reform will aim to maintain or raise retirement plan participation of workers and the resources available for retirement.”  The proposal does not address questions relating to the possible elimination of stretch inherited IRAs.

Read more in Bloomberg Law Tax Management Weekly Report, October 2, 2017, “Big Six Tax Framework: 5 Policy Decisions.” (subscription required)