3 Tips on Estate Planning During a New Presidential Administration

Recent and substantial changes in the country’s executive and legislative branches have many people curious about how the estate and gifts tax will be impacted as well as when such changes will occur. During his campaign, President Biden pledged to cancel many tax policies implemented by President Trump. 


Most noticeably, in response to the Tax Cuts and Jobs Act of 2017, President Biden had promised a much more progressive approach focused on increasing the tax burden of high-income individuals. 


What Tax Changes Are Likely


Passed at the end of 2017, the Tax Cuts and Jobs Act doubled the federal estate and gift tax exemption to $10 million. A sunset provision, however, was written into the regulation which will lower the amount to its earlier levels at the end of 2025. 


Currently, as of February 2021, the tax exemption is $11.7 million for individuals and $23.4 million for married couples. If the new political administration does not make the change sooner, this exemption is scheduled in 2025 to reduce to $5 million for individuals and $10 million for married couples. 


During his presidential campaign, Biden proposed reducing the exemption to $3.5 million for estate taxes and only exempting $1 million for the gift tax. President Biden also favors utilizing a top estate tax of 45 percent rather than the current rate of 40 percent. Biden has also announced plans to end the “step-up” in basis that exempts beneficiaries substantial income tax liability for capital gains on inherited assets that have appreciated in value. 


Some of the assets known to appreciate in value include mutual funds, real estate, and stocks. If a beneficiary sells an inherited asset, the capital gains are currently the difference between the asset’s fair market value at the time of the sale minus the fair market value of the asset at the date of the deceased individual’s death. Without the step-up basis, the capital gains that are generated on the sale of inherited assets would be much greater.


Perform an Adequate Plan Review


The most critical step that a person can take to plan around these potential changes is to understand both their current estate plan as well as the available tools to reduce taxes and achieve your objectives. It’s also a wise idea to incorporate as much flexibility into your estate plan as you can. 


Some of the helpful things to consider as you prepare for a likely change in estate planning tax exemptions include:


  • In accordance with the terms of your current estate plan, what happens when you die.
  • The value of your assets and liabilities.
  • Whether estate taxes are likely to be an issue for you and your family.
  • What beneficiary designations exist on your retirement plans and life insurance.
  • What options are available to modify the terms of an irrevocable trust.
  • The date and changes you made the last time you revised your estate plan.


Speak with an Experienced Estate Planning Attorney


If you do not take the time to fully prepare but plan to engage in estate planning before tax laws change, you could easily end up making undesirable decisions or losing out on significant opportunities. Instead, if you plan on making the most of the situation, you should not wait any longer to speak with an experienced estate planning lawyer. Contact Ettinger Law Firm today to schedule a free case evaluation. 



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