Several Senators (Warren, Whitehouse, Sanders and Van Hollen) sent a letter to the IRS this week urging the IRS to make various changes to grantor trust rules. These Senators have sent similar letters in the past and nothing has really been implemented. However, the IRS is under a Democratic administration and perhaps this may get some traction.
In the letter, they mention that the number of estates that have paid any estate tax have dropped in recent years. The high was 7.65 percent in 1976 (when the federal exemption was a “whopping” $60,000. The latest figures show that only .08 percent of estates owed estate tax in 2019 with an exemption close to $12 million.
The proposed changes are as follows:
Make any transfer between a grantor and a grantor trust a taxable event by revoking Rev. Rul 85-13,
Make the payment of tax for the benefit of a grantor trust a taxable gift by revoking Rev. Rul. 2004-64,
Make Intentionally Defective Grantor Trust assets not get a step-up in basis,
Set a minimum percentage of GRAT assets be considered a gift (part of the Biden Green Book proposals), and finally
Reduce the ability to discount transfers of family limited partnerships.
As we mentioned, these proposals have been made by these same Senators multiple times. We shall see if any of them get implemented.
