So much for the "permanent" tax law changes that were just enacted a few months ago. President Obama's new budget now includes an increase in the estate tax along with other measures to make it more difficult for families with larger estates to pass assets onto their children.
In January, the President and Republicans agreed to tax estates at 40% with an exemption of $5 million per person (indexed for inflation). Obama's budget, however, proposes to raise the top rate to 45% and reduce the exemption to $3.5 million. This new exemption level would not be indexed for inflation which means that over time, smaller estates would begin to be hit with an estate tax.
In addition, the budget makes proposed changes to utilizing short-term GRATs as well as making gifts of family limited partnerships--techniques which have been used for years to minimize estate and gift taxes.