With Democrats taking control of both houses of Congress and President Biden’s new administration in the White House, many folks may be concerned about their estate plans and changes that may come with a new tax reform. This Forbes article suggests that while there is a possibility that tax reform could pass later on in 2021 and be retroactive to January 1, tax advisors feel that this is unlikely to happen. Most advisors believe that tax reform would come into effect in 2022, after most of the population has been vaccinated against the Coronavirus. The article lists five possible ways that tax reform could affect your estate plan and how you can prepare now.
- Estate tax exemption – This could be lowered to $3.5M as estimated by the Tax Policy Center
- Estate tax rate change – Currently at 40 percent, it could increase.
- Lowering the gift tax – It is possible that the gift tax exemption could be lowered to $1M.
- Elimination of the step-up in basis at death – This would mean heirs would be required to pay capital gains tax on inherited property
- Potential increase in capital gains rate – For those making more than $1M annually, Biden’s proposed tax plan suggests increasing the long-term capital gains tax rate
It’s never too early or too late to start making adjustments and considerations for your estate plan. If you would like to review your plan with our team and have peace of mind, contact Rhodes Law Firm today!