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IRA Financial Blog

Estate Planning Tips in Light of Proposed Tax Bill – Episode 311

Adam Talks

In this episode of Adam Talks, IRA Financial’s Adam Bergman Esq. discusses his thoughts about how you can save on taxes based on provisions, both good and bad, in the proposed tax bill.

Mr. Bergman continues to address the provisions in the House Ways and Means Committee’s recent tax proposal. In this episode, he will share some estate planning tips. If the provisions relating to estate planning remain in the bill, you may need to make other plans for when you pass. However, the bill is not entirely negative, so you may be able to save on taxes.

Estate Planning

Obviously, as you get older, you need to decide on certain aspects of your life when it comes to estate planning. Who is in your will, your beneficiaries, and how any inheritance may affect your heirs. The provisions in this tax bill will go into affect as soon as it is passed. It’s important to be prepared before this happens. Adam will discuss some of the provisions and what you can do to prepare.

Some of the important provisions in the bill include the lowering of the gift and estate tax exception, an excess tax for higher earners, and the elimination of grantor trusts. These are key elements when it comes to estate planning.

Unified Credit

Everyone has a lifetime exemption, or unified credit. Currently, that exemption stands at $11.7 million per individual. Obviously, this is doubled for married couples. If this remains in the bill, the new credit will be drastically reduced to around $6.03 million, beginning in 2022.

Essentially, as it stands now, if your assets total less than $22.4 million if you are married, you are not subject to a federal estate tax. If you exceed that amount, you would be subject up to a 40% tax, in addition to state taxes.

The legislation would almost halve that amount, bringing in a lot more people to the equation. Remember, this includes all your assets, including real estate and any business you own. Lastly, if you are married, once you pass, your estate would go to your spouse tax free, no matter the value. However, when the surviving spouse passes, that where the estate tax comes into play.

Step-Up in Basis

On a positive note, the bill does not eliminate the step-up in basis. Essentially, the step-up in basis allows you to bring your assets to their fair market value from what you paid for them. That step-up is not taxable. For example, you pay $1,000 for stocks and they are now worth $10,000, you wouldn’t owe taxes on the appreciation of those stocks.

Instead of eliminating the step-up, the bill calls for a three percent tax on income exceeding $5 million. If you remain under that threshold, there is no extra tax. Once you exceed it, you will owe the 3%.

Grantor Trusts

Grantor trusts would be eliminated with this bill. A grantor trust allows the creator of the trust to control the assets held inside it. The grantor is the one who is taxed on those assets. An individual’s tax burden is much more favorable to those of a trust. The beneficiaries of the plan do not pay the tax, which is a great estate planning benefit.

Essentially, the provision would not allow one to escape the estate tax. You would have to pay taxes to get your assets into the trust, and it would then become a part of your estate.

Estate Planning Tips

In the podcast, Adam Bergman really dives deep into some estate planning tips. In short, you should speak to a trust or estate planning attorney right now. If the proposed bill gets passed, you will not have time to plan your estate with the current, more favorable, rules.

This is especially true if your estate will exceed the $6 million threshold. The grantor trust, SLATs, GRATs, or other trusts should be considered. You can still set up a trust in a tax-advantaged way. However, as soon as these provisions are enacted, you will not be able to go back. It still remains unclear how the grantor trusts will be handled once the new laws are in place.


It’s not all bad news when it comes to estate planning. However, if you are expected to be impacted by any new legislation, you should be proactive in setting up your estate as soon as possible. Once the bill is enacted, your loved ones may be stuck with a high tax bill once you and your spouse pass.

To learn more about the tax proposal, be sure to check out Adam Talks each week. Adam Bergman will continue to inform about all the provisions that pertain to tax and estate planning, as well as retirement savings.


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