With presumptive President-elect Biden preparing to take office this January, it is important to be aware of possible implications of a Biden Administration for your short- and long-term estate planning.
The Biden tax proposal, among other tax reforms, includes sweeping changes to the Estate and Gift tax system. His stated goal is to return estate tax exemptions back to “historical norms.” While it is hard to know exactly what this entails, it may include reducing the current estate gift tax exemption amount of $11.58 million to $5 million, and possibly much lower.
His proposal also seeks to eliminate the step-up in basis for inherited assets, resulting in significant exposure to additional income tax liabilities for inherited assets.
However, what seems to be certain is that any transfer of assets that is completed in 2020 will not be affected by any later changes in the law.
Many of us remember the panic that set in before the change of administration in 2012, and the flurry of transfers that were conducted at that time. Then, many of the transfers proved to be ultimately unnecessary. While a repeat of that scenario is certainly possible, we do believe that individuals who currently have a net worth of more than $5 million (or $10 million for a married couple) should seriously consider making gifts of their assets to trusts for estate tax planning purposes.
Please contact our office if you would like to discuss further.