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September Review: Estate Tax Changes Around the Corner?

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September review

October is around the corner, which means it’s time for the September review of elder law news and developments. Of utmost concern: Potential changes to the estate tax. We’ll devote most of our review to the current proposal, even though it’s very far from a done deal. Those who might be affected should think about preparing for “what ifs.”

Taxing Landscape

Democrats have been talking about taxing the rich for a while. This month, the plan really got going. The House is fast-tracking a proposal from House Ways and Means Committee to pay for President Biden’s $3.5 trillion reconciliation bill. Which changes will survive is uncertain; lawmakers refer to it as “a menu of options.”  Some tax adjustments likely will take effect in 2022 (or even before), but no one really knows what they’ll look like. Still, the proposed changes are alarming enough to put estate planners everywhere on edge. The highlights of only the major changes that could affect your estate planning:

The Exemptions

Now: People give away $11.7 million (or $23.4 million per married couple) during their lifetimes or at death without paying any estate or gift tax.

Proposed: The basic exclusion amount reverts to a $5 million base, adjusted for inflation starting with 2010. This change was already planned for January 1, 2026. The proposal moves that up to next year. Sources say the basic exclusion amount would be about $6 million per person, or $12 million per married couple. The same change would apply to the generation-skipping transfer exemption. If this change does not go through, it is estimated that the exemption will exceed $12 million beginning in 2022.

Grantor Trusts

Now: One estate planning technique is a sale to a grantor trust in which the grantor is also the owner of the trust assets. No gain is recognized, avoiding income tax. And the asset appreciates outside the grantor’s estate, avoiding estate tax.

Proposed. The technique is pretty much eliminated. Assets transferred to such a trust will be included in the grantor’s estate if he or she is deemed the owner. And distributions and terminations, for the most part, will be treated as gifts for gift tax purposes. Sales or exchanges between a grantor trust and the deemed owner would trigger gain, and losses would be disallowed.

Valuation Rules

Now: Planners often use discounts to reduce the value of an asset by gifting minority interests – worth less due to the lack of control.

Proposed: Discounts are limited, particularly for nonbusiness or “passive” assets, or those not used to actively conduct a trade or business.

What Did Not Change (So Far)

Portability, which allows surviving spouses to take advantage of their deceased spouse’s exemption, remains an option.

Step up in basis, which re-sets an assets’ tax basis at death. President Biden had proposed eliminating this perk for assets over $1 million.

No wealth tax, but Sen. Elizabeth Warren is still pushing.

Given the maybe-maybe not uncertainty, here’s:

September Review: Estate Planning

Don’t forget: there are other techniques that will still work if you want to avoid estate tax. Some of them are included here.

And there are planning challenges that will be here regardless of what happens with tax proposals, including how to avoid probate, and how to plan for singles, cohabitating couples, and business owners.

Speaking of business owners, this article says the fight over Bob Ross’s estate has lessons every business owner can learn. Here’s a big one: carefully consider how ownership changes at your death. Make sure it matches both your wishes and the rest of your estate plan.

Estate Sale of the Month

Last but not least for the September review, if you were a fan of late singer B.J. Thomas, is having an estate sale. You can pick up a Raindrops Keep Fallin’ on My Head umbrella for just $125.


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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.