A Nov. 9 Bloomberg BNA story quoted McGuireWoods partner Bill Sanderson on the implications of a Senate Republican proposal to double the estate tax exemption as part of its tax reform legislation.
Sanderson explained that the plan would create an incentive for wealthy clients to give away appreciable assets. The current exemption level is $5 million for individuals and $10 million for married couples. “For clients with a lot of wealth, it gives them an opportunity to give more assets away today to future generations and avoid appreciation,” he said.
While the increased exemptions allow for greater wealth transfers, only the very wealthy can benefit from such planning, he noted. “You have to have really a lot of money to give up to $20 million as a couple and it not impact your lifestyle or your bottom line,” he said.
Sanderson said the Senate’s approach offers clients certainty, while the House effort — which repeals the tax in later years — may lead to more changes in the law. “The problem with the House proposal is that the estate tax may be repealed and then there might be a move to reinstate the tax, and that kind of uncertainty makes planning difficult,” he said.