Tax Plan Signals Importance of Immediate Estate Planning

As details emerge on presidential hopeful Joe Biden’s proposed tax plans, it is becoming increasingly clear that the tax landscape created by the Tax Cuts and Jobs Act (TCJA) of 2017 will be significantly altered if control of the White House changes hands this November.

Under Biden’s plan, the lowered corporate tax rate, Section 199A deduction, 1031 exchanges for real estate, and the increased gift and estate tax exemption could all be in jeopardy. Fortunately, there is still time during the 2020 tax year to take advantage of many of these strategies, particularly in your estate plan.

According to the proposed plan and the recently issued Biden-Sanders Unity Task Force Recommendations, Biden’s tax regime could:

  • Return estate tax to the “historical norm.” This might include slashing the gift and estate tax exemption from the current $11.58 million in 2020 down to as low as $3.5 million (2009 level) and/or returning to the 2009 estate tax rate of 45%.
  • Eliminate the step-up in basis for inherited assets. It is unclear whether this provision would be replaced with the carryover basis, which imposes a higher income tax liability on the heir when the asset is sold, or a new capital gains tax on the decedent – an option favored by the Obama administration.

Make Estate Planning a Priority this Year

Should the election results or the economic impact of the COVID-19 crisis cause favorable TCJA estate tax provisions to sunset prematurely, time is of the essence to plan or reassess your gifting and estate strategies. Transferring wealth under the current heightened exemption level will result in significant tax savings, which will remain effective even after the exemption amount reverts as scheduled in 2026 – or much sooner.

How to Get Started

Grassi’s Trust & Estate professionals can help you develop a plan that maximizes your tax savings potential and achieves your wealth transfer, gifting and charitable goals.

Lisa Rispoli Lisa Rispoli is the Partner-in-Charge of Trust & Estate Services at Grassi and leader of the firm’s Private Client Services group. She has over 30 years of experience in accounting, estate planning & valuation, as well as gift, estate and trust taxation. Lisa is adept at working with clients and their professional advisors to develop estate plans to transfer family, business and personal wealth... Read full bio

Categories: Trusts & Estates