A Pleasant Surprise

Many commentators expected that the new tax bill would pair the repeal of basis step-up at death with the repeal of the estate tax. They were pleasantly surprised to see that basis step-up at death remains unaltered under the bill released last week.

If the bill is passed without changes to these provisions, then planning will focus on maximizing basis step-up at death, perhaps with additional lifetime gift planning in anticipation of a reasonably likely future return of the estate tax in the future when political tides shift. This planning will apply immediately to those whose estates are under the increased unified credit equivalent amounts (these amounts will double in 2018), and then to larger estates once repeal of the estate tax becomes effective in six years.

Of course, repeal may never happen, even if the bill becomes law. We have been down this road before, with the 10 year wait for repeal under the Bush tax cuts. When that 10 year period expired and the dust settled on Congress, we were left with only one year of repeal and then a reinstated estate tax (albeit with increased unified credit exemptions and a reduction in rate).