High-net-worth Americans are setting up trust funds, giving large gifts to heirs and philanthropies, and even selling family businesses as they brace for the tax hikes a Joe Biden presidency might bring, Axios' Jennifer A. Kingson and Hans Nichols report.
- Why it matters: President Trump has jacked up the amount that people can leave tax-free to their heirs to record highs. If Biden wins, his tax shakeup would have ripple effects on how the wealthy buy and sell properties, allocate savings and investments, and give to charity.
Family business owners who have been flirting with selling their companies are making a big rush to the exits:
- It takes months to close such a deal — and waiting until next year could mean paying 40% in taxes on the transaction vs. 20% this year, Joe Maier, an estate-planning attorney in Racine, Wis., tells Axios.
- Buyers are lowballing their bids — knowing that a seller could be grateful for a 10% smaller offer as long as the deal closes in 2020.
Biden says he wants to raise taxes on people who earn more than $400,000 a year — which excludes most Americans — and lower the amounts people can give tax-free to their spouses and heirs.
- He also wants to tax capital gains and dividends at 39.6% for people making over $1 million.
- The goal is to raise revenue for federal coffers while targeting a segment of society that can best afford it (and for whom few people feel sorry).
How it works: Biden proposes to cut in half the unusually generous cap of about $23 million that a couple can leave to heirs tax-free. This means gift and estate taxes, which can climb to 40%, would kick in at much lower dollar amounts.
- If Biden wins, tax professionals expect an even greater stampede of customers who want to make gifts, set up trusts and establish philanthropic vehicles called donor-advised funds (DAFs) — all before Dec. 31.
Reality check: "Just 1.9 percent of taxpayers would see a direct tax hike" if Biden’s tax proposals for individuals were in effect in 2022, the Institute on Taxation and Economic Policy (ITEP) estimates.
- Many of Biden's proposals would simply attempt to roll tax laws back to where they were when President Obama left office.
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