Liberty Upton Posts Article: Should You Update Your Estate Plan In Light of Biden’s Proposed Tax Plan


In the lead up to the 2020 election, there has been speculation that tax law changes may occur in the first year of a Biden Presidency if Democrats maintain control of the House of Representatives and flip the Senate. The three main changes in Joe Biden’s proposed tax plan that could have an impact on estate planning are as follows: (1) reducing the Federal Gift and Estate Tax Exemption (“Exemption”) from $11.7M to $3.5M, (2) increasing the top estate tax rate for estates exceeding the Exemption from 40% to 45%, and (3) making death a realization event for appreciated assets. The main focus of this blog post is the potential decrease of the Exemption.

In 2017, there was a dramatic (but temporary) increase to the Exemption from $5M (indexed for inflation) to $10M (indexed for inflation). In 2021, the inflation-adjusted Exemption will be $11.7M (the 2020 Exemption is $11.58M). Without intervention in the meantime, the temporarily increased Exemption will revert to $5M (indexed for inflation–roughly around $6M-$6.5M) on January 1, 2026.

Over the weekend, every major news network officially declared that Joe Biden would be the 46th President of the United States of America. So, what does this mean for your estate plan? If the Exemption is decreased to $3.5M, will the change be retroactive to January 1, 2021? Should you make large gifts now to take advantage of the temporarily increased Exemption? Unfortunately, there are no clear answers. While Democrats will likely maintain a narrow majority in the House of Representatives, President-elect Biden’s ability to enact tax law changes will depend on who controls the Senate, and control of the Senate likely will not be decided until a January runoff for two seats in Georgia. Unfortunately, waiting until January to make large gifts may be too late to take advantage of the current increased Exemption.

If you are considering updating your estate plan during this period of uncertainty, you should talk to your Estate Planning Attorney and your Financial Advisor sooner rather than later. Together they can help determine if you should make any large gifts before the end of 2020 and if you can afford to give up both the benefits and control of the assets. If you are comfortable giving away your assets, the next step will be to determine how much you can afford to give away. Generally, to take advantage of the current increased Exemption ($11.58M less prior taxable gifts), the person or couple making the gift will likely need to gift several million dollars.

If you are ready to discuss potential gift strategies, please reach out to any Estate Planning Attorneys at Carney Badley Spellman, P.S.

Dean Butler

Susan Schalla

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