Most people aren’t rich enough to benefit from sunsetting estate tax provision
Most people aren’t rich enough to benefit from sunsetting estate tax provision
Ahead of Tuesday’s election, former President Trump and Vice President Harris’s plans for the federal estate tax are getting some attention.
The recent buzz comes because an exemption in the 2017 tax law is due to sunset at the start of 2026. Without an extension, the amount very rich people can gift tax-free before or after their deaths will be cut in half.
Some believe an extension is more likely to come under Trump. Regardless, most Americans aren’t wealthy enough for it to matter.
In the 1990s, the federal estate and gift tax allowed up to $600,000 in tax-free bequests. Patrick Simasko, professor of elder law at Michigan State, said Congress has steadily raised that ceiling.
“It went from 600 to 650 to a million, to a million five, three and a half million,” he explained.
After the 2017 tax reforms and with cost of living increases, the amount is now close to $14 million. “So for the vast majority of families, it will never come into play,” Simasko said.
Something like 0.2% of people who die every year are rich enough to be impacted by the sunsetting of this perk, according to the Tax Policy Center. Simasko, who is also a financial advisor, is talking with a handful of his wealthiest clients about it.
“I haven’t had any clients pull the trigger and say yeah, let’s start giving away the money right now,” he said. Instead, Simasko said they’re waiting for the results of Tuesday’s presidential election.
While the presidential election will be important, Carol Schleif with BMO Wealth Management pointed out that voters will also want to watch down-ballot races.
“Regardless of who sits at 1600 Pennsylvania Avenue, the purview of tax law is Congress,” Scheif said. She believes that if Congress stays divided, we shouldn’t count on any major moves on that front.
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