Obama Budget Proposes Estate Tax Change

Among the revenue-raising proposals in President Obama’s fiscal year 2014 budget
is a return of the estate tax to its 2009 level beginning in 2018.  The
White House budget plan also calls for eliminating “a number of
loopholes that currently allow wealthy individuals to use sophisticated
tax planning to reduce their estate tax liability.”

In January, as part of the fiscal cliff deal, Congress set
“permanent” estate tax parameters, including a $5 million exemption (now
$5.25 million due to inflation) and a 40 percent maximum rate.  Under
the President’s proposed budget, the exemption would drop to $3.5
million in 2018 and it would not be indexed for inflation. The top
estate tax rate would rise to 45 percent.  The generation-skipping
transfer tax and the gift tax would also fall to 2009 levels ($1 million
in the case of the gift tax). 

The budget includes this statement: "As part of the end-of-year
'fiscal cliff' agreement, congressional Republicans insisted on
permanently cutting the estate tax below those levels, providing tax
cuts averaging $1 million per estate to the very wealthiest Americans.”

The White House budget would also curtail certain estate planning
strategies. For example, the budget would require a minimum ten-year
term for grantor retained annuity trusts (GRATs) created after the date
of enactment, as well as a maximum term of the life expectancy of the
annuitant plus ten years; modify the rules on valuation discounts; and
limit the duration of dynasty trusts to 90 years.

For the American Institute of CPAs' "Estate Tax Provisions in President's Fiscal Year 2014 Proposed Budget, click here.  More on the proposed tax changes are available from AccountingWeb and Wealth Strategies Journal.

The White House says that at the 2009 estate tax thresholds, about 3
in 1,000 people were subject to the estate tax. The Treasury Department
estimates the change would raise about $79 billion over 10 years.