Under current law any one person can die and leave $5.3 million at death without triggering the federal estate tax. Married couples can leave an unlimited about, tax free, to US citizen spouses. With the exemption tied to inflation, planning done now evolves nicely over time. And then I blinked.
Over the past two years, as I discussed the federal estate taxes in seminars, I routinely joked "what Washington giveth, Wasthington can taketh -- keep an eye on this issue." Perhaps I told that joke one time too many. News reports last week of the President's proposed budget include language to reduce the federal estate tax exemption in 2018 to $3.5 million, and to my dismay, remove the indexing to inflation, would tax any amount over the exemption at 45%.
And so our brief honeymoon with stability in the area of the federal estate tax is over. Clients with a net worth of several million need to consider putting in tax planning language, just in case. And I'll be watching and reading what comes out of DC, curious to see what, if anything, happens in this area. Once a city I called home, it is a curious and fickle town.
Author's children, playing in the sand on The Mall. National Capitol in the background.