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Homepersonal financeDemocrats may rein in big estates without reforming the estate tax

Democrats may rein in big estates without reforming the estate tax

  • Democrats may limit some strategies used by wealthy Americans to reduce or avoid estate taxes, according to a list of potential tax reforms connected to their $3.5 trillion budget plan.
  • The strategies include grantor-retained annuity trusts, intentionally defective grantor trusts and non-economic valuation discounts.
  • They're often used by multimillionaires and billionaires to gift appreciated assets to heirs tax-free while reducing the size of their taxable estate, according to experts.

Drew Angerer | Getty Images News | Getty Images

Democrats may scuttle tactics used by the rich to pass wealth to heirs with little to no tax, part of a broader plan to raise money for an expansion of the U.S. safety net.

Specifically, the party is considering disallowing some complex trust-planning techniques used by wealthy Americans to avoid estate tax, according to a discussion list of potential tax reforms obtained by CNBC.

Congressional Democrats may also ask the Treasury Department to update regulations to "prevent the abuse of non-economic valuation discounts," according to the list. This concept applies, for example, to entrepreneurs who give a minority interest in their business to their kids at a discounted rate.

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