Out With the Old (Tax Plan), In With the New

President-Elect Biden’s tax plan for 2021 should affect your estate planning in 2020.

President-Elect Biden’s tax proposals, as they relate to estate taxes, could have a huge impact on the estates of high net worth individuals. The current federal rules allow individuals to gift or bequeath up to $11.58 million in assets ($23.16 million for spouses) without incurring gift or estate tax. However, President-Elect Biden’s tax proposal reduces this exemption amount as low as $3.5 million for individuals. If this proposal becomes law, it could be applied retroactively to January 1, 2021.

If you (or your clients) fall into the high net worth category, now is the time to review your estate plan and consider making gifts to irrevocable trusts, adult children, etc. to take advantage of the current historically high exemption amount before it disappears. Assets such as real estate, artwork, life insurance and stock are ideal for gifting, and these gifts can be structured in such as way as to fulfill your overall estate planning goals.

President-Elect Biden’s tax proposals also include an increase in the long-term capital gains tax, so if you are considering selling real estate, artwork or any other asset that may have a low basis, you should discuss the timing of such sales with your tax advisor.