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Inauguration Perspectives: Estate Planning

estate planningThe winds of change have blown through Washington. It’s important for forward-thinking Americans to consider how a new federal administration will impact estate planning and taxes—and especially the intersection of the two. By now most Americans are aware that a new Democratic majority has big plans, and that means big spending, which means big taxes. Coupled to this news is the fact that the individual tax cuts put into play by the Trump administration’s Tax Cuts and Jobs Act are set to expire in 2026.

One area impacted by this change is the exemption from estate taxes. Under the TCJA, anyone could transfer up to $11,580,000 to their heirs without incurring a 40% tax on the assets transferred. This current exemption limit is actually double what it was in 2018, and the Biden administration has indicated favoring a return to (what they refer to) as a historically normative amount, potentially to $3,500,000.

Another crucial area impacted by this change is the basis adjustment of the value of bequeathed assets. Currently, inherited assets receive a basis adjustment to fair market value at the time of the original owner’s death. This makes it easier for heirs to sell off assets without suffering from a massive capital gains tax; without the basis adjustment, the capital gain calculated for these assets would be based on their value at purchase…yielding a higher dollar amount, and (you guessed it) more taxes. The Biden administration has proposed eliminating this basis adjustment, and has even floated the idea of making capital gains taxes immediately due on the decedent’s passing.

As you can see, these are changes that merit serious consideration for high net worth individuals. It’s also possible that if the proposed tax plans don’t support the sizable agendas of the current administration, even more changes will be made impacting estate planning for the middle class. With a Democratic majority in both chambers of the legislature, nothing is off the table.

This is why it’s crucial to meet with estate planning attorneys in Wisconsin like those at the firm of McLario Helm Bertling & Spiegel…and not to delay. Changes made by the new administration could be retroactive, so meeting with Wisconsin estate planning lawyers is not something to save for tomorrow.

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