Americans are reconsidering their estate planning strategies following Joe Biden’s presidential election win. Biden made his desire to raise estate and capital gains taxes well known on the campaign trail, leaving many people to redouble their efforts to protect their assets. The good news: there is still time to take action before Biden is inaugurated.
Your personal course of action may depend on your income, how much money you require to live, your charitable goals, and your own personal comfort level. No matter what your plans are, keep these considerations in mind ahead of inauguration day:
Gift and Estate Taxes
This year, the gift and estate tax exemption amount remains at $11.58 million per person, or a little over $23 million for couples. This figure was doubled by the 2017 Tax Cuts and Jobs Act. The enhanced exemption is set to expire in 2025 and return to $5 million (adjusted for inflation). With Biden winning the election, that means the expiration date may come sooner than anticipated.
Biden’s proposal to increase the capital gains tax rates for those earning more than $1 million to 39.6 percent would also eliminate the tax code’s step-up provision. This currently allows heirs to sidestep taxes on gains accumulated before death.
What does this mean for you? Well, if you are worried about losing your high exemption amount, you may want to up your charitable giving this year. Just be sure you can truly afford a charitable gift without it impacting your daily life – even if it means your heirs may pay a little more in taxes down the road.
Capital Gains Taxes
Since Biden’s win, some Americans have become worried about a possible increase in the capital gains tax. Current law treats capital gains on investments held at the time of a taxpayer’s death as freebies. Under Biden’s plan, long-term gains and dividends may be taxed as ordinary income for those with a taxable income of $1 million or more. The top rates could go as high as 39.6 percent versus the current 23.8 percent now.
This would be the highest rate increase in decades, so naturally, there is pressure to moderate the impact of such a change. Affected taxpayers may want to accelerate any large gains this year instead of waiting to see what Biden has in store.
To ensure your assets are protected and your estate taxes are minimized as much as possible, contact Your Legacy Legal Care at (281) 885-8826 or click here to schedule your strategy session today.
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