New York Estate Planning & Elder Law Blog
The transition between US presidents is often a trade-off. While some advantages come from the change in leaders, there are also setbacks. While president-elect Joe Biden has announced a more-extensive plan for containing the COVID-19 pandemic as well as plans for minorities in the country, Biden also has expressed the intent to raise capital gains and estate taxes as well as change how capital assets are taxed at the time of death.
As a result of this change in US politics, some individuals have begun to reconsider their estate planning strategy. In much the same way that no two estate plans are the same, the course of action you decide to utilize in response will also be unique and depends on various factors including your income, what you need to live on, and your gifting objectives. This article briefly discusses the potential impact that Biden’s presidency will have on your estate plan.
# 1 – Estate and Gift Taxes
Due to the Tax Cuts and Jobs Act of 2017, the threshold for estate and gift taxes is $11.58 million for individuals and $23.16 million for married people. Threshold means that amounts under these limits are not subject to these taxes. This amount has doubled from its previous levels. At least by 2025 when this limits “sunsets” and perhaps sooner, the exemption will return to this original, lower threshold.
Because Biden won the election, however, there is a belief that either the “sunset” will occur sooner or the exemption will be reduced to lower than it originally was. On the topic of estate and gift taxes, this is not all that people are concerned about with Biden’s approaching presidency, though. Some individuals are concerned that Biden will eliminate the “step-up in basis” clause in the tax code which individuals currently utilize to avoid taxes on gains that accumulate before a person’s death.
In response to this change, some individuals are gifting a large amount of cases this year because they are fearful that the Biden presidency will result in the loss of this high exemption.
# 2 – Capital Gains Tax Issues
Besides estate and gift tax issues, some people are focused on the potential increase in the capital gains rate due to the Biden presidency. Many people are left uncertain about how to respond to make the most of the current capital gains rate before it changes. While it might be tempting to liquidate the entirety of some people’s assets, this is often not the best move. Instead, if you plan on selling assets within the next couple of years, it might sense to liquidate assets now to make the most out of tax law. This does not mean, however, that people should liquidate all of their assets.
Contact a Knowledgeable Estate Planning Attorney
If you have questions or concerns about how the election of Joseph R Biden Jr as president will impact your estate plan, you should not hesitate to speak with an experienced lawyer. Contact Ettinger Estate Planning today to schedule a free case evaluation.