Thursday, July 29, 2021
There has been speculation on what President Biden's tax proposal will look like and what effects it will have on estate planning. There is also a question about the likelihood that President Biden's tax plan will be enacted into law.
The Biden Administration announced the American Families Plan in April 2021, which proposed "significant tax law changes to increase taxes on both corporations and high-net worth individuals and to provide more resources to enhance IRS tax enforcement efforts.
In May 2021, the United States Department of Treasury issued a report entitled, "General Explanation of the Administration's Fiscal 2022 Revenue Proposals (generally referred to as the Green Book) which included more details on the tax law changes previously proposed in the American Families Plan." The memo provided an overview of the proposed changes of the American Families Plan and the impact those changes may have on estate planning.
Under the current proposal, "there will be a realization of capital gains to the extent such gains are in excess of a $1 million exclusion per person, upon the transfer of appreciated assets at death or by a gift. . .the proposal would provide various exclusions and exceptions for certain family-owned and operated businesses.
One thing that was not addressed in the Green Book are changes to the federal estate, gift and generation skipping transfer (GST) tax system, although Biden did propose these changes during his campaign.
There is a lot of uncertainty surrounding new tax laws, so high-net-worth individuals with estate tax concerns should consider taking advantage heightened exemptions by implementing wealth transfer strategies like the following:
- Intentionally Defective Grantor Trust (IDGT)
- Spousal Lifetime Access Trust (SLAT)
- Grantor Retained Annuity Trust (GRAT)
- Charitable Lead Annuity Trust (CLAT)
- Annual Gifts
- And more.
See Jeffrey M. Glogower, Stephen J. Bahr, & Adam W. Randle, Impact of President Biden's Tax Plan on Estate Planning, The National Law Review, July 26, 2021.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.