They say that “elections have consequences” and this is true on many levels. As estate planning attorneys, we keep a finger on the pulse of possible outcomes that can impact our field. The last presidential election brought some significant changes to the federal estate tax, and it could happen again.
The estate tax credit or exclusion is the amount that can be transferred before the tax would become applicable. It should be noted that this levy carries a 40 percent rate, so it can seriously impact the legacy that you intend to pass along to your loved ones if you are exposed.
After a piece of tax legislation was passed, the exclusion was set at $5 million in 2011. This number was retained for a number of years, and there were annual adjustments to account for inflation. In 2017, the exclusion was $5.49 million.
The administration that entered the White House at the beginning of that year signed a new tax act into law at the end of 2017, and it went into effect the following year. It raised the estate tax exclusion up to $11.18 million for 2018.
There have been inflation increases since then, and during the current calendar year, the exclusion is $11.58 million.
Capital Gains Tax and the Step-Up in Basis
If you inherit assets that appreciated during the life of the person that left you the inheritance, you would not be responsible for the appreciation from a capital gains perspective. For the purposes of this tax, the present value would be the value at the time you inherited the assets.
Biden Policy Platform
Joe Biden is ahead of the incumbent right now in the polls, and some of his competitors during the primary wanted to impose a so-called “wealth tax” on the wealthiest Americans. He has not adopted this policy, but he has stated that he would attempt to eliminate the step up in basis.
As you might imagine, high net worth individuals use this to their advantage as a tax efficiency strategy. He has not specifically proposed a reduction in the estate tax exclusion, but this is certainly a possibility.
Obviously, the president does not have the power to unilaterally change the tax code, because it takes congressional approval. This being stated, analysts expect the Democrats to retain their majority in the House of Representatives, and gauging from the polls, they may be able to take control of the Senate.
We will certainly keep a close eye on the situation if changes become likely after the election, and we will share all relevant information right here on this blog.
Attend a Webinar
Our attorneys have always offered seminars to provide detailed information to people that are interested in the estate planning process. It is not safe to gather in relatively large crowds in person, so we have adjusted to convert our seminars into webinars.
We enjoy meeting people in person, but there is something to be said for convenience, and safety is our primary concern. The seminars are being offered free of charge, and you can see the schedule and obtain registration information if you visit our webinar page.
Put a Plan in Place!
We would be more than glad to help if you are ready to discuss your estate planning goals with a licensed attorney. Once again, we have altered our approach, so we are now consulting with our clients remotely. You can request an appointment if you send us a message, and we can be reached by phone at 513-721-1513.