Should My Estate Plan Change under President Biden?

President Joe Biden
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Estate planning laws may change under Joe Biden.

New leadership brings changes.

This is true of companies, teams, and the United States government.

The recent elections shifted the White House and Senate to Democrat majority.

According to a recent St. Louis Business Journal article titled “Estate planning in light of a new presidential administration: What should you do now?,” this shift will likely usher in changes to estate planning law at the federal level.

President Biden will likely push for tax law changes.
Biden promised estate tax changes during his campaign.

What might this look like practically?

Joe Biden made clear during his campaign his intentions to shift the burden of taxes to businesses and “high-income” individuals.

This will likely result in undoing many tax policies of the former administration.

A likely target will be the popular Tax Cuts and Jobs Act (TCJA).

This temporarily increased the federal estate and gift tax exemption with annual adjustments for inflation until 2025.

The exemption is at $11.7 million for individuals in 2021 (and $23.4 million for married couples in 2021).

These thresholds were set to be lowered to $5 million for individuals and $10 million for married couple after 2025.

Biden and the Senate will likely drop these thresholds far sooner and perhaps even further.

Another expected change involves the “step-up” in basis for appreciated assets.

A “step-up” in basis protects those inheriting appreciated assets from being required to pay capital gains taxes on those inherited assets.

These assets are typically mutual funds, real estate, and stocks.

At present, with a “step-up” in basis, an heir can sell such an inherited asset and only owe capital gains taxes on any appreciation occurring between the decedent owner’s date of death and the sale date.

If Biden makes the change, taxes will be owed on the value appreciation from the time the decedent purchased the asset to the time heir sells the asset.

Yikes!

If your current estate plan relies on the higher estate exemption and the “step-up” in basis, you may want to schedule an estate plan review.

Making changes based on anticipated changes in tax laws may prove unnecessary.

Even so, having an outdated estate plan can be detrimental.

It is important to understand your current estate plan and whether it still works to accomplish your goals and minimize taxes.

Even if Biden and the Senate do not make significant changes to estate law, changing personal goals and shifting family circumstances make scheduling estate plan review a prudent action.

Reference: St. Louis Business Journal (Jan. 27, 2021) “Estate planning in light of a new presidential administration: What should you do now?”

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