Q: Ross asked, “What financial and tax policy considerations should I be planning for if Joe Biden became President in November?”
A: Ross, this has been one of the most popular questions among readers and I am going to do my best to provide some politically unbiased guidance on what may help you in the event we have a change in Presidential Leadership in November. Currently, in reading Vice-President Biden’s policy statements and studying his potential tax proposals, I see five primary tax-themes that might be in play in 2021 if he were elected. Perhaps the two largest potential changes that could affect everyone is a suggestion to increase capital gains taxation to a 39.6% rate applied to capital gain events that exceed $1 million or more.
The second and probably the most impactful of the two is the proposal to eliminate the “Step-Up” in basis at one’s death of assets that are transferred to heirs. The risk of loss of “Step-Up” is a serious concern for the owners of low-basis holdings, such as real estate, private-family businesses, low-basis security holdings; mineral and patent rights; artwork; as well as, air- and marine-craft. The window for active planning could be very short for those with wealth transfer concerns. Such tax policies even not-passed until later in 2021 could become retroactive effective January 1, 2021; therefore, only allowing owners of low-basis holdings less than 60 days to modify their wealth transfer directives to avoid these potential changes. My advice is to not procrastinate. Section 1014(a) has been one of the most favored benefits in planning for wealthy savers.
If Presidential leadership were to change, you would most likely see a mad-rush of planning activity that would act as a log-jam and many individuals who were not properly prepared by their advisors ahead of the election could get caught “holding the bag.” The good news is that you may have a number of ways to prepare to avoid this pitfall. Visit my Tax Mitigation and Wealth Transfer pages on this website to learn more.
