The Build Back Better Act (the “BBBA”) is proposed legislation released by the House Ways & Means Committee on September 13, 2021. Much like President Biden’s previously released tax plan, the BBBA seeks to increase taxes on high net-worth taxpayers, close “loopholes,” and give the IRS more resources to enforce the tax laws. While the BBBA does not include some of Biden’s more controversial proposals (e.g., elimination of basis step-up at death and imposition of income tax on gifts of appreciated property), the BBBA, if passed, will make certain common gift and estate tax-reduction techniques either obsolete or limited in nature.
The Build Back Better Act proposes to make numerous changes to current tax laws that may impact high net-worth individuals. The following are four proposed changes we expect to have the largest impact on estate tax planning for our high net-worth clients:
- Valuation discounts on transfers of partial interests in passive assets held for the production of income and not used in the conduct of a trade or business (non-business assets) will be eliminated on or after the effective date of the BBBA.
- The value of assets transferred to grantor trusts on or after the effective date of the BBBA