Estate Tax Provisions in President's Fiscal Year 2014 Proposed Budget 


    Administration’s Budget Proposal Includes a Proposal to Clarify Generation-Skipping Transfer (GST) Tax Treatment of Health and Education Exclusion Trusts (HEETs)

    A podcast on the estate planning impact of this and other provisions in the President's budget is available on the estate tax webinar page.

    Among the various estate tax proposals in the recently released President’s fiscal year 2014 budget proposal and Treasury explanation, is a new proposal that would clarify that the GST tax exclusion does not apply to certain distributions made from HEETs for purposes of medical care and education. The proposal would apply to trusts created after the introduction of the bill proposing this change and to transfers after that date that are made to pre-existing trusts.

    Other Relevant Provisions: The budget proposal would also:

    • Return permanently the estate, gift, and generation-skipping transfer (GST) tax regimes to the 2009 rules (45% top tax rate and $3.5 million exemption for estate and GST tax and $1 million for gift tax, starting in 2018 and not indexed for inflation);

    • Require consistency in value for transfer and income tax purposes (effective date of enactment);

    • Coordinate certain income and transfer tax rules applicable to grantor trusts – potentially altering estate planning techniques and transfer tax benefits of sales to intentionally defective grantor trusts (IDGTs),  (effective date of enactment)

    • Require a minimum 10-year term for grantor retained annuity trusts (GRATs) and a maximum term of the life expectancy of the annuitant plus ten years  – impacting the ability to use GRATs for estate tax planning (applicable to trusts created after the date of enactment);

    • Limit the duration of GST exemption to 90 years (for additions to pre-existing trusts and trusts created after the date of enactment); and

    • Extend the lien on estate tax deferrals provided under Sec. 6166 (up to 15 years and three months from the date of death) (for decedents dying after the effective date and pre-existing unexpired liens on the effective date). 

    Interesting Observation: Unlike prior proposed budget proposals, the fiscal 2014 proposed budget no longer contains the proposal to modify the rules on valuation discounts.

    For further information, see details on these estate tax proposals, and Journal of Accountancy article.
    including the ability to create transition relief for certain types of automatic, periodic contributions to existing grantor trusts.

    For further information, see details on these estate tax proposals and a Journal of Accountancy article on the budget proposal.

    See fiscal year 2013 proposals for prior year's estate tax revenue proposals.

    See fiscal year 2012 proposals for the prior year's estate tax revenue proposals.

    See fiscal year 2010 proposals for the prior year's estate tax revenue proposals.




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