This post was authored by Salvatore M. Capizzi, Dunham's Chief Sales & Marketing Officer. If you have questions concerning today's topic, please call us at (858) 964 - 0500. Hold us to higher standards.

Now may be too late.

On Wednesday, I had a Zoom meeting with a financial advisor and her client. The client has a rapidly growing $13 million estate. This was our third meeting with the client and their spouse. As the session ended, they decided to move forward with some recommendations we made, and they needed an estate attorney to draft some of the documents.

I told them about an attorney out of Alabama that I enjoy working with. I then sent that attorney an email on Wednesday night telling him I had a client for him and placed the details in the email.

Here is the response I received on Thursday morning:


Hope all is well with you and your family.

Unfortunately, due to the House Ways and Means Committee announcement on Monday that the estate tax exemption will be cut in half effective January 1, 2022, we are only taking a few new cases where the estates are large enough to makes use of their $23.4M exemptions while they are still available.

I would otherwise love to help, but between now and 12-31, I am totally consumed with this type of planning.

Warmest regards,

The estate tax landscape and how assets will be passed to the next generation will dramatically change if the House Democrats tax bill released last week comes into play.

The proposed plan would increase the current tax on estates and eliminate some of the planning strategies used to minimize taxes on assets inherited by wealthy families.

If this version or any version of the estate tax changes proposed becomes law, your wealthy clients will look to you for help. However, waiting too long will leave them behind as the demand will seriously outnumber the number of qualified estate attorneys available to help them.

Emails similar to the one I received Thursday may leave your client with unfavorable estate tax when the New Year arrives at midnight on January 1, 2022. The sad reality is that they could have received help and possibly saved a significant amount on taxes if they acted sooner.

The point is, you need to start working on this NOW, as you may already have difficulty getting in line to help your client in 2021.

Here is a quick summary of some of the proposed changes:

Estate Tax Sunset in 2022 Rather Than 2026

The House plan accelerates higher estate tax exclusion enacted by Congress created in 2017. As the attorney in my email mentioned, the estate exclusion is currently at $11.7 million per individual. Under the proposal, the exclusion would drop to around $6 million in 2022. Assets over that amount would be subject to the 40% estate tax.

Limits the Use of Grantor Trusts

A Grantor Trust is a trust where the person who created the trust continues to pay income taxes on its assets rather than the trust or the beneficiaries. This is done primarily for income and estate tax purposes. The bill will severely limit the use of these trusts after 2021.

Increase for Income Tax

The top marginal income tax rate increases to 39.6% plus a 3% surtax on more than $5 million of income. In addition, clients will reach this higher level at $450,000 for joint filers and $400,000 for single filers.

Increase in Capital Gains Tax Effective Immediately

Capital gains tax will increase from a maximum of 20% to 25% for high-income taxpayers who sold their assets after Sept. 13, 2021. In addition, if the asset also qualifies for the 3.8% Net Investment Income tax, the total tax will be 28.8%.

Individual Retirement Accounts

They proposed several changes for sizeable individual retirement accounts, including eventually eliminating back door Roth conversions.

Child Care Credit Through 2025

The current child care tax credit of up to $3,600 per year would be extended through 2025 for all working families receiving the full credit if they make up to $150,000 for a couple or $112,500 for a family with a single parent (Head of Household).

Increase in Corporate Tax

The top corporate tax rate would be increased to 26.5% from 21% while offering a lower rate to smaller businesses.

Start Planning Today

The clock is ticking, and the buzzer will go off long before December 31, 2021. All of us at Dunham are prepared to help in the planning process. Do not hesitate to call us at (858) 964-0500 or click the button below to fill out our contact form if you have a client you believe needs help.

Contact Form

Disclosure: This document is provided for informational purposes only by Dunham & Associates Investment Counsel, Inc. solely in its capacity as a Registered Investment Adviser and should not be construed as legal and/or tax advice. Dunham & Associates Investment Counsel, Inc. does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Subscribe to the Dunham Blog