The “Neal Proposal”: Proposed Legislation and Action Items

Released on Sept. 13, 2021, the “Neal Proposal” to the U.S. House of Representatives Ways and Means Committee is disrupting many common estate planning tools and creating uncertainty about the total impact of the proposed legislation. Within this bulletin, we highlight some of the key concerns and what to consider when addressing the potential impact with
your clients.

THE HOUSE WAYS AND MEANS PROPOSAL REDUCES THE ESTATE TAX EXEMPTION

While likely not the final word, the Tax Cuts and Jobs Act (TCJA) temporarily doubled the basic exclusion amount (estate and gift tax exemption) from $5 million to $10 million per person, indexed for inflation. Currently indexed to $11.7 million, this was originally intended to “sunset” on Dec. 31, 2025. However, Bill Section 138207 causes the basic exclusion amount to revert to $5 million (indexed for inflation from 2011) for gifts made, or decedents dying, after Dec. 31, 2021. Additionally, because the Internal Revenue Code1
(IRC) ties the Generation Skipping Transfer tax (GST) exemption to the basic exclusion amount, the GST exemption will also revert to $5 million, indexed for inflation from 2011. It is estimated that the gift, estate, and GST exemption (when adjusted for inflation) will be approximately $6 million.

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