Update on possible tax changes and wealth transfer planning

Blog Post

Since our last update, the Biden administration released its $6 trillion budget proposal and the Treasury Department released its “Green Book” containing the narrative description of the possible tax changes in support of the budget, including: 

  • Increase capital gains to 39.6% (the top tax rate) for taxpayer with $1 million or more of income.
  • Recognition of capital gains on transfers to and from trusts, corporations, partnerships and limited liability companies—deemed to be a sale. This is more onerous than carry over basis in that it imposes a tax immediately instead of when the recipient sells the assets.

Notably, there is no mention of increased wealth transfer taxes via reduction of exemptions and increased estate tax rates.

What are the prospects for tax changes and effective dates?

The proposed change to increase the capital gains tax rates for taxpayers with $1 million plus of income is the date of announcement: on or about April 28, 2021. Other changes on the deemed recognition of capital gains on transfers of appreciated assets during life or at death would apply after December 31, 2021.  

Tax changes in the proposed For the 99.5% Act and the proposed STEP Act eliminating the change of cost basis at death could be incorporated in any budget reconciliation bills as a means of paying for the proposed spending increases.

No one can be certain as to which laws may be enacted or as to when changes would be effective. There are not many legislative days left before Congress’ summer recess, leaving most action until after Labor Day. Getting 60 votes for passing in the Senate or 51 votes for budget reconciliation lessens the likelihood of more extreme changes.  

McDonald Hopkins strongly encourages you to initiate or continue discussions and preparations for implementation of plans to counter potential tax increases—we remain cautious but ready to implement the planning when there is more certainty. Contact information for our Estate Planning and Probate attorneys is listed below.  


Michael P. Witzke

Jeffrey P. Consolo

Bernard L. Karr

Roger L. Shumaker

Michael G. Riley

Brian J. Jereb

Katherine E. Wensink

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