The 99.5% Act

As of April 2021, the senate has released a plan for the 99.5% Act, which proposes to significantly reduce the current estate and gift tax regimes.

The 99.5% act includes the following estate and gift tax proposals:

Reduces the estate tax exemptions to $3.5 million.
Reduces the gift tax exemption to $1 million.
Limits the gift tax annual exclusion.
Limits the use of valuation discounts.
Eliminates any step up in basis included in the grantor’s gross estate.

Creates new estate tax rate brackets as follows:

— 45% for taxable estates between $3.5 million to $10 million

— 50% for taxable estates between $10 million to $50 million

— 55% for taxable estates between $50 million to $1 billion

— 65% for taxable estates above $1 billion

The 99.5% Act not only raises annual gift tax issues when the annual policy premiums are high, it also puts those funds back into the overall estate, so when the policy proceeds are transferred at the time of the grantor’s death the cut taken by estate taxes could be dramatic.

The proposals coming out of Washington are creating a whole new mechanism to tax wealth and re-establishing principles that we have had in place in the tax system for decades. Now, wealthy taxpayers are in the crosshairs of a determined Biden Administration.

While the current tax laws are in place, Premium Financed Life Insurance is the ultimate solution to reduce estate tax.

The risk is too great to leave the Federal Government in charge of your (or your clients) money.