Patten and Company

For the 99.5% Act

On March 25th, Senator Bernie Sanders introduced the “For the 99.5% Act,” a proposal that could significantly reduce currently available gift and estate tax exemptions. If passed, the act could impact families not previously subject to gift and estate taxes. The act, whose potential enactment date is January 1, 2022, proposes the following major changes to estate and gift taxes:

Estate and GST Tax Exemption

  • Reduces to $3.5 million per person ($7 million per married couple), IS indexed for inflation. Previously, $11.7 million per person ($23.4 million per married couple)

Gift Tax Exemption

  • Reduces to $1 million per person ($2 million per married couple), NOT indexed for inflation. Previously, $11.7 million per person ($23.4 million per married couple)

Estate & Gift Tax Rate

  • Increases on a portion of a taxable estate:
    • 40%-45% – $3.5 million to $10 million
    • 50% – $10 million to $50 million
    • 55% – $50 million to $1 billion
    • 65% – $1 billion & up

Qualifying GST Exempt Trusts

  • Imposes a 50-year term limit on generation-skipping trusts (also known as dynastic trusts or GST trusts)

Annual Gift Tax Exclusion

  • Reduces to $10,000 per donee, plus adds an annual cumulative limitation per donor of two times ($20,000) the annual limitation

Elimination of Valuation Discounts

  • Eliminates marketability valuation discounts on passive assets and minority interest valuation discounts on family-controlled business entities

Grantor Retained Annuity Trusts (GRAT)

  • Imposes a minimum term of 10 years and minimum gifts of 25% upon funding of the GRAT

Code Section, IRC § 2901

  • Imposes a gift tax or an estate tax on property owned by grantor trusts


While it is important to note that the “For the 99.5 Percent Act” is only in the proposal stage, it may indicate the direction of change for estate planning. Whether the mentioned legislation is put in place as of the date of signing, or effective as of January 1, 2022, as the proposal suggests, it provides an opportunity for families to take advantage of the still-elevated exemptions and other wealth transfer techniques that may be impacted by any future legislation.

If you have questions surrounding you or your family’s specific tax or planning situation, please feel free to reach out for assistance.

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