On October 29, 221 a new draft of the “Build Back Better” bill was released. That new version of bill eliminated the proposed reduction in estate tax exemptions from $11.7 million to about $6 million. So unless there are additional changes to the law (which seems very unlikely), clients will still have an estate tax exemption of about $12 million in 2022. Finley Stetson predicted that Congress would drop any changes to the estate tax exemption.
The latest draft of the Build Back Better bill also removed the provisions limiting discounting strategies for family limited partnerships and the provisions regarding the “grantor trust” rules.
So what does this mean? First, there shouldn’t be a mad rush to accomplish transactions by year end because of fear that the estate tax exemption will be reduced. But remember, the estate tax exemption is scheduled to be reduced to pre-Trump levels on January 1, 2026.
Second, many of the “grantor” trust techniques that we use are still valid, such as SLATS (spouse lifetime access trusts), GRATS (grantor retained annuity trusts), and ILITs (irrevocable life insurance trusts).
Third, family limited partnerships that hold securities can still obtain marketability and minority interest discounts on limited partnership interests.
Negotiations over the Build Back Better bill are still ongoing, and Congress could theoretically add these provisions back into a final bill. But that isn’t very likely. We should still have at least a few more years to plan with unusually high estate tax exemptions before they are scheduled to be cut in 2026.