The House Ways and Means Committee agreed to the tax provisions of the $3.5 trillion Build Back Better Act (BBBA) on September 15, 2021. If you’ve been following the political news, you may be wondering how this legislative act might affect you—and especially your estate plan.
At California Probate and Trust, PC in Fair Oaks, CA, our attorneys and their support team know what it takes to draft solid estate plans that will continue to serve as financial safety nets if the Build Back Better Act passes. Let’s discuss how much the tax provisions of the Build Back Better Act will impact estate tax planning in California.
What Is the Build Back Better Act?
President Joe Biden’s Build Back Better Act (BBBA), which passed the House Ways and Means Committee on September 15, 2021, focuses on social and educational reforms. The goals include creating jobs, lowering health care and education costs for singles and working families, and making the tax code fairer by cutting taxes for average Americans.
To balance these measures, the act would also increase taxes on wealthy Americans. Some of the most important aspects of the Build Back Better Act include:
- Excellent workforce training programs
- Reduced prices on prescription drugs
- Lower tuition for higher education institutions
- Less expensive health care costs
- Budget-friendly housing costs
- Tax breaks for families with children
- Tax cuts for individual workers without children
- Additional support for teachers and schools
- Creation of clean energy jobs
- Lowered childcare costs
How Will the Proposed Legislation Impact Estate Planning?
Taxation on Sales to Grantor Trusts
The new legislation would no longer allow one of the most popular estate planning strategies. In the proposed Build Back Better Act, Section 1062 states that you would have to pay capital gains taxes on all assets you sold to your irrevocable grantor trust. Losses and asset depreciation would not affect your tax burden.
Changes to Other Estate Planning Strategies — Taxation of Grantor Trusts
Some of the changes that will take place if Congress passes the proposed Build Back Better Act would include:
- Spousal Lifetime Access Trust — Trusts that provide for the needs of the spouse during the spouse’s life would be treated as a grantor trust and become subject to the estate tax
- Grantor Retained Annuity Trusts — Appreciation of assets within Grantor Retained Annuity Trusts (GRATs) would become taxable at the end of the annuity term
- Insurance Trusts — Premium payments made for an insurance policy held in trust would become subject to the estate tax
Would Reduce the Federal Estate, Gift, and Generation-Skipping Transfer Tax Exemption
Under the current law, the estate and gift tax exemptions will stand at $11.7 million per person until January 1, 2026. The proposed Build Back Better Act legislation would lower the estate, gift, and generation-skipping transfer (GST) tax exemptions to $6 million, effective on January 1, 2022.
Material Relief for Properties Used in Farming or Other Trades or Businesses
As per the proposed Build Back Better Act legislation, any property used for farming or other trades and businesses would get valued depending on the use of that land, rather than the actual market value. With this change, properties used for farming and other trades would enjoy material relief from the estate tax.
Choosing a Living Trust Attorney for a Revocable Trust
If you need a highly experienced estate planning attorney in Fair Oaks, CA, to draft your revocable living trust documents before the Build Back Better Act impacts California estate tax planning, be sure to call upon our highly credentialed legal experts at California Probate and Trust, PC (SCL).
Our professional estate planning attorneys at California Probate and Trust, PC will help you with the legal ramifications of any tax code changes caused by the proposed BBBA legislation. We will enable you to decide on the distribution of your assets, maintain control over your assets while you are alive, and provide for your family members upon death.
One of our team of estate planning attorneys will guide you through all legal matters by:
- Giving you a thorough understanding of federal and state laws
- Helping you in making decisions if the Build Back Better Act gets passed
- Remaining up-to-date on changes to the law
- Reviewing your existing estate plan
- Helping you create a new, custom-tailored estate plan
- Advising you regarding strategies and techniques to keep your family assets safe
- Devising a personalized business tax strategy
California Probate and Trust, PC — Trusts and Estate Planning Attorneys in Fair Oaks, CA
As with all major overhauls of tax laws, The Build Back Better Act has the potential to turn your California estate plan upside down. If the BBBA passes, consult with our estate planning attorneys at California Probate and Trust, PC to create optimized strategies for your estate.
Our living trust attorneys focus on drafting durable estate plans and take immediate action regarding planned trust transfers. We remain dedicated to taking care of seniors and their families. We strive to provide valuable tax advice, draft customized revocable living trusts and wills, and serve the best interests of our clients.
Protect your assets and provide for your family’s future by preparing a detailed estate plan. Call our California Probate and Trust, PC team at (916)-674-2066 to book a free consultation.
Request a copy of our free guide, The 7 Reasons Why You Need An Estate Plan by calling our 24-hour hotline at 916-306-0388. Leave us your name, phone number, and mailing address and we’ll send the guide to you ASAP.
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The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.
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