OFFICIAL PUBLICATION OF THE MONTANA INDEPENDENT BANKERS ASSOCIATION

Pub 9 2021 Issue 1

transitioning-your-wealth

Transitioning Your Wealth: Potential Tax Policy Changes With The New Administration

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With the new Biden administration and the Georgia senate runoff election results, there may be future changes in tax legislation that could affect the wealthy for income, estate, and succession planning purposes.

Areas to Pay Attention to in Your Wealth Plan

In the priorities suggested by nominated Senate Finance Chairman Ron Wyden, there appear to be three proposed tax legislation areas that may affect clients looking to transition wealth and business interests down to the next, or lower, generation. Those areas are: Increase in Capital Gain Rates, Loss of Stepped up Tax Basis, Reduction in Estate Tax Exemption.

There has been discussion of a potential increase in the capital gains tax rate to a rate that could be more in line with the higher income tax rates. Also mentioned is the removal of the stepped-up tax basis at death. The stepped-up tax basis is viewed as primarily benefitting the wealthy or moderately wealthy.

In 2021, the estate tax exemption is $11.7 million per person. This higher exemption level will sunset Dec. 31, 2025, and return to $5 million per person, adjusted for inflation. With the adjustment for inflation, it is expected that the exemption will be somewhere between $6 million and $7 million per person.

However, recent proposals could reduce the estate tax exemption to $3.5 million per person and increase the top tax rate to 45% before the Dec. 31, 2025, sunset date.

What to Consider Next for Your Estate Plan

With the new administration’s tax legislative priorities, timing may be critical to take advantage of the lower capital gain rates or use of the higher estate exemption. Allow yourself ample time to have planning discussions with your gift and estate tax advisors.

Dive Deeper: Visit EideBailly.com to read more about what to consider in your estate plan.

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