Biden's CGT proposal sets estate planners to work |
Estate planners for the wealthiest Americans are combing through the Biden administration’s proposed tax increases, hunting for ways to sidestep the potential hit from higher taxes on investment income and new capital-gains taxes at death. The result, so far, is early strategizing about making gifts this year before some changes would take effect. That approach is mixed with acceptance that Congress will pass some significant tax increases and tempered by hope that it won’t. The president has proposed raising the top capital-gains tax rate to 43.4% from 23.8% and taxing appreciated assets at death as if they had been sold. Under current law, appreciated assets held until death escape the income tax. Heirs pay capital-gains taxes only when they sell and only on gains since the prior owner’s death. Among wealthy individuals, “there’s a lot of anxiety and nervousness that’s being generated by all the proposals,” Ani Hovanessian, a partner at Venable LLP., commented. Taxing appreciated assets at death is essential for Democrats’ plan to equalize tax rates on capital gains and ordinary income. “The rule for gains was always: defer, defer, defer,” said Tara Popernik, director of research at AllianceBernstein Holding LP’s private wealth unit. Under the Biden proposal, she said, it may make sense for clients to take gains in smaller chunks while living—for instance, in a year when their income falls under the $1m threshold where the 43.4% rate would start.