In 2017, the Trump Administration passed the Tax Cuts and Jobs Act, which – among other things – doubled the federal estate tax exemption. With adjustments for inflation, the exemption now sits at $11.58 million for individuals and $23.16 million for married couples. This increase allowed many wealthy Americans to breathe a sigh of relief from estate tax concerns, at least until the Act’s expiration date of 2025.
Now, however, concerns have returned with President-elect Joe Biden’s expected transition to the White House. Wealthy individuals and married couples have already been scrambling to adjust their estate plans in a manner that might protect their wealth from a reduced exemption and increased estate tax liability. If you have concerns about this matter due to your personal worth, you should not wait any longer to discuss the matter with a Chicago estate planning and tax lawyer.
The Democratic platform has discussed returning estate taxes to the “historical norm,” which could refer to the exemption of $5.49 million that was in place prior to the sweeping 2017 tax legislature. However, it is important to realize that passing new tax changes can be a lengthy and complex matter, and this is likely not a change that will happen right away, especially if the Republicans hold the majority in the Senate come January.
However, in response to the election being called in favor of Joe Biden, many wealthy people might be rushing to revise their existing trusts and create new ones before December 31, 2020. This can help to minimize additional tax consequences should changes go into effect in 2021.
While Biden’s tax plan involves increases for the more affluent to potentially fund federal paid family and medical leave, it has rightfully stressed out many people who have enjoyed significant tax breaks in the past three years.
Additional increases might include raised taxes on long-term capital gains for taxpayers claiming income over $1 million. At this income level, you might pay income taxes of 39.6 percent on such gains, compared to the current system that taxes a maximum of 20 percent for those reporting more than $441,450.
There were different ways that wealthy individuals protected their estates from estate taxes prior to the 2017 exemption increases, and there will continue to be ways to protect your wealth should the exemptions get cut. It is important to have the right legal professional evaluating your situation and determining the best course of action to shield your estate from federal estate taxes whenever possible.
At Harrison & Held, LLP, our legal team not only provides guidance on tax planning issues, but we also handle a range of estate planning matters. With this combination of experience, we are more than ready to assist with planning related to possible changes in U.S. tax laws. Contact us to learn more about how we can assist you.
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