On March 25, 2021, Senator Bernie Sanders introduced legislation called “For the 99.5% Act.” This bill is aimed at the fortunes of the top 0.5% of wealthy Americans. This is the first piece of legislation introduced following President Joe Biden’s coming into office that would lower the federal estate tax exemption. In summary, the bill would make the following important changes to many of the important U.S. federal transfer tax provisions:
The effective dates for the 3 three foregoing changes will be for decedents dying after December 31, 2021, and for gifts made after December 31, 2021.
The effective dates for the 3 three foregoing changes would be for transfers made after the date of enactment of the legislation.
The effective date for this provision will be on the date of enactment of the legislation.
The effective date for this change would be for trusts created after the enactment of the legislation, or in relation to trusts created before the enactment of which contributions are made to such trust after the enactment of the legislation.
The effective date for this change shall apply to any calendar year beginning after the date of the enactment of the legislation.
It is not clear yet if this new legislation will gain any traction in Congress. With a Democratically controlled Congress, many believe there is a chance that the reduction of the federal estate tax exemption could happen, particularly as this was a campaign item for the President. Some of the other items have been part of previously issued “Green Books” by the U.S. Treasury in some shape or form but never made their way to a piece of legislation. It should be noted that this bill does come off the heels of proposed legislation introduced by Senator Elizabeth Warren on March 1, 2021, to be called the “Ultra-Millionaire Tax” and proposing a new federal wealth tax. If any of the foregoing proposals should be passed, there will be a significant impact on many of the common succession planning techniques to reduce federal transfers for high net worth individuals. It will be important to monitor the progress of these proposals and be prepared.