Report: Wealthy Americans Are Changing Their Estate Plans Over Concerns of Tax Increases
A few weeks ago, a post on this blog discussed former Vice President Joe Biden’s plans regarding the United States Tax Code if he were to be elected president in this year’s general election. Of course, with every new presidential administration comes certain changes to the nation’s tax policies. With this in mind, Mr. Biden’s campaign maintains that his policies would not raise taxes on anyone making less than $400,000 per year.
But, what about those who make over $400,00 per year? In short, they stand to be the most affected by the proposed tax policies of a hypothetical Biden presidency. In fact, as Joe Biden continues to lead President Trump in many pre-election surveys, many wealthy Americans are starting to take action to protect themselves from possible increases in certain types of taxes. According to recent report shared by Fidelity Investments, high net-worth individuals have started amending their estate plans in an effort to safeguard their assets from increasing tax obligations.
Exemption Cuts or Tax Increases?
Depending on the outcome of the election next month, there could be major tax reforms coming, especially in regard to estate taxes and gift taxes. Each candidate for president has his own views regarding such taxes, as does each candidate for U.S. representative and senate seats.
Currently, an individual can leave $11.58 million in assets to heirs without incurring any federal estate or gift taxes. This exemption is set to expire in 2025, but financial advisers say that the exemption could be cut as soon as next year . According to Fidelity, some lawmakers want to restore the estate tax exemption to the “historical norm,” which experts believe could mean cutting the exemption down to $5.49 million. Whether you want to call it an exemption cut or a tax increase, the net result is that wealthy individuals will be subject to more taxes when leaving their assets to heirs in their estate plans.
There is also the possibility of raised taxes on long-term capital gains for those who make more than $1 million per year. According to reports of one such proposal, the top-tier tax rate would jump from its current 20% to 39.6% for the wealthiest taxpayers.
A Race Against the Calendar
The Reuters report shared by Fidelity indicates that when Mr. Biden pulled ahead of President Trump in various polls in June, estate planning lawyers began to see a serious uptick in calls from wealthy clients looking to amend their estate plans. Estate planning firms throughout the country say they are being bombarded with requests for appraisals related to estate and gift taxes. Wealthy Americans are also reportedly working to set up and amend trusts before the end of 2020 in order to avoid tax consequences that could arise in 2021.
While high net-worth individuals may have good reasons to be worried about a sudden and drastic change to U.S. tax policies, there are also dangers associated with acting too soon. Many of the trusts that are being used to shield against possible tax increases can be extremely difficult, if not impossible, to undo once they are established. In many cases, such trusts involve large sums of money, which could leave people very hesitant to make such big financial decisions so quickly.
Contact a DuPage County Estate Planning Lawyer
If you are a wealthy individual, and the possibility of increased taxes has you concerned about the feasibility of your estate plan, an experienced Naperville estate planning attorney at The Gierach Law Firm can help you explore your available options. Call 630-756-1160 to schedule a confidential consultation with a knowledgeable member of our team today.