Private Business Counsel

As reported in an article from today’s (September 23, 2016) Wall Street Journal, Democratic presidential nominee Hillary Clinton has proposed an increase in the federal estate and gift tax.  She would lower the federal estate tax exemption from the 2016 amount of $5,450,000 per individual (twice that amount for a married couple) to $3,500,000 per individual (again, twice that amount for a married couple).  Today, the maximum federal estate and gift tax rate is 45%, but under Clinton’s plan the following additional rates would be added:

• A 50% rate applicable to estates in excess of $10 million
• A 55% rate for estates between $50 million and $500 million
• A 65% rate for estates in excess of $500 million

The article reports that under Clinton’s plan the step-up in basis at death – which exempts from capital gains tax pre-death appreciation on assets sold after death –would be eliminated for high-income taxpayers.  Instead, a transfer by gift or at death of assets whose basis is lower than fair market value would be treated as a taxable event and trigger capital gain.

The Clinton campaign reports that her plan would raise federal revenues by $260 billion over ten years.

The article notes that in 2014 only 223 federal estate tax returns were filed which reported an estate of $50 million or more.  Also, estate and gift tax receipts comprise less than 1% of all federal revenue.

If Clinton’s plan were to take effect a reduction in the federal estate tax exemption from its current $5,450,000 to $3,500,000 would impact numerous people.  Because we do not know who will win the presidential election and how the balance of power in Congress may change as a result of the election, clients who might become subject to federal estate tax because of this possible reduction in the exemption should consult with their tax advisors and estates counsel.