Fearing Biden tax hikes, wealthy Americans rush to change estate plans
By Suzanne Barlyn
(Reuters) - Wealthy Americans are scrambling to change their estate plans before the end of the year, fearing Democrat Joe Biden will win the US presidential election and collect taxes, money rate financial advisors say.
The main concern is that the White House and Congress could become embroiled in a "blue wave" of democratic victories that would give Biden the power to propose and pass sweeping tax reforms.
Wealthy people are especially nervous that an exemption that allows individuals to leave heirs up to $ 11.58 million free from estate or gift taxes could be cut before it expires in 2025.
According to the party's platform, Democrats want to raise the estate tax to the "historic norm". That could mean the tax exemption will be reduced to $ 5.49 million, as it did before Republican President Donald Trump signed a comprehensive tax bill in 2017 that included benefits for businesses and wealthy Americans.
It is unclear how the elections will go or how the tax reform will go. Changing tax codes can also be complex and time consuming. But as Biden is up in the polls, rich people are rushing to set up trusts and revise existing ones before the end of the year to avoid tax ramifications for 2021, advisors said.
"The $ 11.58 million question is, 'What will happen to the gift and estate tax exemption?'" Said Toni Ann Kruse, a New York real estate attorney who advises wealthy people. "We don't know who will win the election or who will control the House or Senate - and all of these factors will contribute to what could happen."
Biden would also "bring estate tax back to 2009 levels," according to his website, to fund paid family and sick leave.
His plan also includes increasing taxes on long-term capital gains. This is the profit made by selling assets that have increased in value. Taxpayers with incomes greater than $ 1 million would pay an income tax of 39.6% on profits, rather than the current tiered approach, which is 20% or less for those with incomes of $ 441,450 or more.
In a statement, Biden campaign spokesman Andrew Bates reiterated the candidate's intention to change tax laws to benefit less wealthy people.
"Joe Biden wants to rebuild the backbone of this nation - the American middle class - by making sure our economy rewards work, not just wealth," he said.
The surge in inquiries for estate changes intensified in June when Biden led Trump on the polls, advisors said. Several firms said they have been overwhelmed by inquiries since then and expect business to pick up further towards the end of the year.
The tax workflow is three times the norm at Miller Samuel Inc, a New York-based real estate appraisal firm, said CEO Jonathan Miller.
"We are currently inundated with requests for gift and estate tax reports," he said.
New York estate and tax planning attorney Philip Michaels has added around 15 high net worth clients over the past few months who are revising their estate plans.
Rockefeller Capital Management, a New York-based financial advisory firm, hosts virtual events for clients while they work with legal and tax advisors to clarify the nuances of potential laws, said Joe Roberts, senior wealth strategist.
Customers are concerned about a "quick turnaround and drastic departure" from the status quo, Roberts said.
At the same time, some customers worry about making decisions too soon. This is because trusts created for lifetime exceptions cannot simply be liquidated.
"There's a lot of money to be given away," said John Olivieri, an Indianapolis estate planning attorney, of some of his clients. "People struggle with, 'Do I really want to reveal this?'"
(Reporting by Suzanne Barlyn; Additional reporting by Trevor Hunnicutt; Editing by Lauren Tara LaCapra and Nick Zieminski)
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