How Will the 2020 Election Affect Estate Planning?
Posted on 12/07/20 By Lorman Team
There's no doubt the results of the 2020 general election will create numerous policy changes across all sectors of industry, especially in regards to health care, immigration, foreign policy, education, and the economy.
In addition to these anticipated changes, tax policy is sure to sit at the top of the legislative agenda, including estate planning and inheritance tax.
These changes are not new, bearing in mind that White House occupancy changes have traditionally come along with various policy changes. And with Joe Biden's forthcoming inauguration in January, it is vital for attorneys who specialize in inheritance tax to inform their clients of what to expect.
Let's break down the current state of affairs and possible changes.
Trump's Tax Cuts and Jobs Act of 2017
The Tax Cuts and Jobs Act (TCJA) enacted in 2017 by the Trump administration remains one of the most highly partisan legislations in the United States. Among the most contentious issues of the legislation was the estate tax, and it remains a point of contention today.
The Trump administration pegged the exception at $11,580,000 per individual. This means anyone can transfer any amount that's not beyond that number to their heirs without incurring any expenses in estate tax.
However, any amount that exceeds $11,580,000 is subject to a tax of up to 40%.
TCJA came into effect in 2018 and was scheduled to run until January 1, 2026 when it would revert to the previous legislation that pegged the tax exemption at 3,500,000.
Post-Election Changes in Estate Tax by Biden
There are longstanding battle lines between Democrats and Republicans, particularly regarding the issue of inheritance tax. With the impending change in administration, clients will need to revisit their plans and make changes appropriately.
As things stand, Biden is the presumptive president-elect. Biden has already advanced a range of tax proposals that will have far-reaching impacts on individuals and how they plan their estates.
These proposals shouldn't catch you or your clients by surprise. Among the changes that Biden will likely make include:
- Reduction of the federal estate tax exemption rate to historical levels
While Biden has not mentioned the specific amount, tax experts believe it could go back to the pre-2017 amounts, which stood at $3.5 million.
- Changing of rules or possible repeal of step-up in basis
We still don't know much about the possible changes in this category; however, there will be modification or elimination of the step-up basis in 2021, which will be drastic.
These changes are inevitable and therefore, there is a rush by attorneys and tax experts to acquire the right estate planning courses in preparation for the impending changes.
Estate Planning Training for 2021
Our upcoming course on post-election estate planning will help you understand your estate planning options, minimize taxes, and plan for a liquid financial future.
Register for this course so you can make necessary adjustments in anticipation of these impending changes in inheritance tax policies when the Biden administration takes over next month.