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Could Estate Tax Repeal Or Reform Become A Reality?

As Yogi Berra once said, “It ain’t over ‘til it’s over.”  Although tax legislation enacted in 2012 included several “permanent” estate tax provisions, including a top estate tax rate of 40% and a maximum exemption of $5 million, indexed for inflation ($5.43 million in 2015), there’s no guarantee that Congress won’t tinker with the law again.  In fact, it’s a good bet there will be more changes.

Earlier this year, the House Ways & Means Committee got the ball rolling by approving a bill to repeal the federal estate tax.  Although the measure passed along partisan lines and appears unlikely to make it into law, it indicates that estate tax reform is back on the table. 

The estate tax was repealed in 2010, but just for one year, before being reinstated. Coincidentally, that was the year that New York Yankees owner George Steinbrenner died, costing the government about $600 million in tax revenue.

The new House bill contains another twist.  In 2010, although there was no estate tax, another tax break—one that limits capital gains taxes on inherited assets in excess of $1 million—was eliminated for non-spousal heirs.  The current bill would set that threshold 20 times higher, at $20 million.

But there’s a long way to go before any estate tax changes are formally written into law.  We will monitor developments affecting your estate plan.

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