3. Proposal: Eliminating the “step-up in Basis”
Are you interested in passing on your wealth to your heirs? A lot of older Americans have to truly consider what they plan on doing with what they’ve accumulated over the course of their lives- some chose to donate almost everything while others wish to pass everyone on to their family.
Well, Biden plans to eliminate the step-up basis used by the wealthy and non-wealthy who wish to pass on their wealth in a tax-efficient manner.
The basis value represents the owner’s original investment in the asset. It rises to the market value as of the date of death and the heir inherits this “stepped-up basis”. If your heir then wishes to sell the assets they can do so with no capital gains tax or a very small capital gains tax and this applies even if they don’t pay the estate tax.
Keep in mind this can apply to real estate, bonds, mutual funds, and even your businesses.
If that sounds like a loophole, you’re not the only one!
Biden plans to get rid of the step-up basis, though Congress would also be needed in order to pass this new law. By doing so your family could be pushed in to the top tax bracket (remember, Biden proposes this to be 39.6%) since they would need to pay ordinary income taxes on the total gains of any of your business assets that they inherit.
So, with these three proposals in mind, it’s time to look at what you can do to prepare for a Biden presidency right now. Click through to find out what key steps will minimize the impact these decisions will have on your life.
