(Lawyers.com) - There has been a lot of discussion surrounding President Biden’s proposed new tax policies. While there is still a lot of uncertainty at this point, we do know that big changes are on the horizon. Key proposals in the estate planning realm that have been considered include:
• Decrease in the estate and gift tax exemptions – The current exemption for estate & gift taxes is $11.7 million per taxpayer. This exemption amount could be cut in half. Taxpayers above the exemption amount would need to consider the tax implications of their estate plan. Taxpayers may also need to consider current gifting while the exemption amount is high.
• Changes to the “step-up” in basis on death – Elimination of the ability to “step-up” the tax basis on assets to fair market value on death would create a tax on unrealized capital gains. This proposal is not currently on the table but is something to watch for as it has been cited numerous times to decrease the wealth-gap.
• Targeting the use of certain Grantor Trusts to shift wealth to heirs – Trusts have been used to distribute assets in accordance with an individual’s wishes and reduce potential estate taxes. The proposed plan would include any Grantor trust in a taxpayer’s estate, effectively disallowing the use of certain trusts to shield assets from estate tax. Trusts already in place would be “grandfathered” in under the old rules, but new contributions to trusts may not. This leaves a small window of time to implement a Grantor Trust strategy.
These proposed modifications to the tax laws could impact the effectiveness of your current estate plan. We are constantly monitoring the situation in D.C. and will continue to provide updates on policies that are relevant to our clients.
By Jeffrey Cohen, Esq., C.P.A.
October 21, 2021
