Obama’s Budget Proposal
Includes Estates, Gifts, and Trusts Taxation Changes
The Treasury Department has just issued “General Explanations of the Administration's Fiscal Year 2016 Revenue Proposals,” http://www.treasury.gov/resource-center/tax-policy/Pages/general_explanation.aspx. In it, the President’s Administration includes a budget proposal that contains proposals to change estate, gift, and trust taxation. Some of these proposals include: 1. imposing a capital gains tax on the transfer of appreciated assets by gift or upon death; 2. reverting the estate, gift, and GST rates and exemptions beginning in 2016 to the levels and rates that existed in 2009 (i.e., $3.5 million estate tax applicable exclusion amount and GST exemption, and $1 million gift tax exemption with a top estate and gift tax rate and sole GST tax rate of 45 percent); 3. requiring that grantor retained annuity trusts (“GRATs”) have a minimum length of 10 years and at the end of the term there be a minimum remainder value of 25 percent of the value of the transferred assets (or $500,000, if greater); 4. Making sales to grantor trusts moot by treating such trusts as an incomplete transfer for gift and estate tax purposes; 5. limiting the protection from the GST tax afforded by allocation of GST exemption to 90 years; 6. causing the lien from estate tax deferrals for taxes attributable to interests in a closely-held business interest to continue throughout the deferral period; 7. limiting the annual exclusion for gifts to most trusts, gifts of interests in passthrough entities, gifts of interests subject to a sales prohibition, and other transfers of property that cannot be liquidated immediately by the donee to $50,000 per year; 8. eliminating stretch IRAs by requiring non-spouse beneficiaries of a decedent's IRA or retirement plan to take inherited distributions over no more than five years; 9. Capping IRA and qualified plan contributions by prohibiting future contributions by a taxpayer with an IRA or qualified plan to $210,000 per year (indexed).
While it is always relevant to read the administration’s proposals, with a Republican dominated House and Senate, the likelihood of any of this passing as actual legislation seems low.
