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By John R. Merlino Jr. Esq.
Founding Attorney

Q: How can a presidential election impact your estate plan?

To say that politics is a hot topic during these unprecedented times would be an understatement. Regardless of what candidate you supported, presidential election years are good times to review your estate plan–or to make one if you haven’t yet done so.

New York and New Jersey estate planning attorneys and financial advisors keep abreast of candidates’ positions regarding intended tax cuts and/or increases and how those actions may impact their clients’ estate plans if passed.

Discussing possible modifications to an estate plan now based on potential changes in tax laws may be wise to assure you’re taking advantage of all available tax planning and investment opportunities for your particular situation which might require certain actions on your part even before the year’s end.

It’s not uncommon for each administration to seek to overhaul the tax plans of prior administrations.

While it may be expected that the 2018 Tax Cuts and Jobs Act that was enacted during President Trump’s administration–which among other things essentially doubled the estate and gift tax exemption through 2025–would have remained unchanged in a second term, a Biden administration would reportedly seek some tax law changes once in office. How will new tax laws impact your estate plan and what, if any, action should you be taking right now?

Potential tax changes in a new administration

In addition to increasing income taxes and payroll taxes on those earning over $400,000, Biden’s plan reportedly proposes boosting “rates on long-term capital gains and qualified dividends…for those with income over $1 million”–a potential change that may cause some to consider selling appreciated investments or converting IRAs.

The 2018 Tax Cuts and Jobs Act “roughly doubled the amount that you can transfer to other people — either at death or as a gift during life — without facing the 40% estate and gift tax”. Currently, there is a tax code provision known as a “step up in basis” that essentially allows a property owner to acquire an asset, hold on to it for years while it appreciates, and then transfer it to an heir, who gets the asset not at the transferor’s original purchase price value, but rather at the fair market value of the asset at the time of the transferor’s date of death. This step-up in basis allows the heir to pay little or no capital gains on the asset.

Reportedly, the Biden plan seeks to raise estate taxes to their “historical norm” and “proposes taxing the unrealized capital gains in the asset at death, which essentially does away with the step-up.”

While kneejerk reactions regarding investments should be avoided, as tax code changes don’t necessarily happen overnight and sometimes not at all, making an appointment with your financial advisor and estate planning attorney –in this and future presidential election years—to review your particular situation will assure you are one step ahead in securing your and your family’s financial future.

If you need assistance with an initial estate plan or would like to modify an existing one, the estate planning attorneys at Merlino & Gonzalez can help you. Contact us today to schedule a consultation.

From our offices in Staten Island, New York, and East Brunswick, New Jersey, we help clients in both states in all aspects of estate planning and estate administration.

About the Author
John is a fierce advocate and the office guru for problem-solving and brainstorming. He guides clients through every stage of a real estate transaction from offer to contract, navigating through nerve-shattering home inspection and title clearance concerns, maintaining constant contact with lenders, conducting the actual closing, and continuing to advise clients with regard to any post-closing concerns.  John brings a practical and fair-minded approach to the process which has earned him the respect of his clients and peers.