Is The Sun Setting In 2021 On Current Tax Benefits For Business Exits?

Now that the election is over and President Elect Joe Biden has will be the 46th United States President, there are proposed tax changes that you as a business owner should be aware of. Many advisors are taking a wait and see view on what changes will actually be enacted but we think that you should do your homework and make sure you are prepared.

What are the key points you should know?

  1. If any or all of the proposed tax changes are enacted, they could take effect retroactive January 1st 2021. Now as one of my colleagues, who is a tax attorney shared with me, the last time a tax change that was enacted was retroactive to January 1st was 1993. 
  2. With stimulus soon to increase past $3 trillion and a Debt to GDP deficit of 136%, it is certain that there will be some kind of tax increase needed to pay down debt accumulated over the past 4 years. 
  3. These proposed tax changes can impact your ability to amass wealth and transfer it to your heirs.

What are the key impact of the proposed tax law changes?

  1. Eliminate your heirs ability to use value "Step Up" creating a capital gain tax at death without ability to gift
  2. Increased tax rate on Capital Gains of 39.6%
  3. Reduction of Estate Tax Exemption from $11.528 million per spouse to estimated $3.5 million per spouse.

We did the math and it potentially reduces your estate from roughly .60 cents per dollar to .20 cents per dollar. 


What should you do?

If you have not completed any trust and estate planning, you still have time to create a simple trust, utilizing a SLAT (form of trust) to gift shares and use one of your spousal estate exemptions. There are control elements and administrative requirements that you should discuss with your trust & estate attorney when using a trust.  

A good strategy would be to try to have your trust documents completed by December 31, 2020. I know it seems like that is not enough time, but you do have time if you start today.


Contact us if you have questions: [email protected] 



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