Thursday, November 19, 2020
As Election Day approached, talk surrounding estate planning grew. Presidential candidate Joe Biden announced his tax plan proposal, which many thought may come to fruition if the Democratic Party won the Presidency and took over a majority of the Senate. The proposed tax plan would significantly reduce estate and gift tax exemptions.
Although the election has come and gone, there is not yet much clarity surrounding the future of estate planning. It appears more likely than not that Joe Biden will be the next President, there is still a lot of discussion. Further, the determination of which party will control the Senate will not be made until the two runoff elections in Georgia are held in January.
Therefore, we will not know who will control the Presidency, House, and Senate until after 2020 has ended. Due to the uncertainty, estate planning has been and will continue to be difficult.
It may be in your client's best interest to take advantage of the current tax exemptions while they are available. Whether this is what is best for your client will depend on their current financial situation. It may be the case that the potential reduced exemptions will not affect them.
However, "The harder situation is for those individuals who might not have a federal tax due at death if the exemptions stay where they are, but would owe tax if they were to be cut by 50% or more. Those of us who lived through 2012 have already seen this movie. In these cases, there may be ways to structure the gift to give a family more time to make the decision."
It is important to discuss the implications of the new exemption rates and the potential impact they could have on your client, whether or not the new tax plan is a sure thing.
See Scott Bieber, Year-end planning just got a whole lot more complicated, Thompson Coburn LLP, November 13, 2020.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.