President Joe Biden announced his FY 2022 budget and has proposed raising taxes on inheritances to help pay for the American Families Plan. Biden’s capital gains tax proposal includes taxes on inherited property at death and excludes the first $1 million of gains. If the inherited property growth is over $1 million, your heirs may owe as much as 43.4% long-term capital gains taxes – and that does not include any state or local levies. The proposal also calls to double capital gains taxes 39.6%. In announcing the proposed changes, Biden said:
“We’re going to get rid of the loopholes that allow Americans who make more than $1 million a year pay a lower rate on their capital gains than working Americans pay on their work.”
Current laws allow heirs to defer taxes on inherited property until they sell it. In addition, Biden’s capital gains tax proposal says:
• Taxes on assets transferred to a spouse would be deferred until the surviving spouse dies or sells the inherited assets.
• Assets donated to charity would be exempt.
• Personal property such as household furnishings and personal effects, but excluding collectibles, would be exempt.
• Gains on a principal residence of up to $250,000 ($500,000 for a married couple) would be exempt,
• Gains on certain small business stock would be exempt.
Many estate planning attorneys are advising their high-net-worth clients to purchase additional life insurance with their heirs as beneficiaries, to cover taxes and expenses.
Lombard estate planning attorney Mario Godoy said:
The biggest advantage to buying more life insurance is peace of mind. You can provide your heirs with extra money to pay for funeral costs, taxes and other after-death taxes.
It takes time to create and knowledgeable advice to create a plan that protects your legacy for the next generation. An experienced estate planning lawyer can advise you on the best options for your specific situation and the various options to choose your beneficiaries.
Contact the experienced estate planning attorneys at Estate and Probate Legal Group in Dupage County, Illinois, to discuss how to preserve your wealth for the next generation. Call us today at 630-864-5835.