Monday, October 12, 2020
- · Eliminate the step-up of the cost-basis for inherited property,
- · Increase estate and gift tax rates by an unspecified amount (it is now 40%), and
- · Decrease the estate tax exemption from $11.58 million to $3.5 million, and the gift tax exemption from $11.58 million to $1 million.
This proposal would reverse the policy on reforms to the tax code that was enacted to pay for World War One.
Historically, both Republicans and Democrats have supported raising the exemption amount and closing potential loopholes. However, Biden is proposing an end to this trend by dramatically decreasing the tax exemption amount.
It may be difficult to see how this may affect you, but it will depend on the reason why you transfer assets. What are your motivations and guidelines?
One thing that is known, high gift and estate taxes are bad because people usually tend to try to avoid them. When rates go up, exemptions go down and the step-up basis is eliminated.
If you are a Progressive and want to raise more taxes and put an end to dynasties fostered and continued through inheritance, "you should press for elimination of the gift and estate tax and have inherited wealth;th treated as ordinary income."
See Matthew Erskine, Why Progressives Should Push To Scrap The Estate And Gift Tax, Forbes, October 9, 2020.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.