Tax Advisors and Estate Planners across the US are urging Family Offices to think about their long-term multigenerational goals before exploring wealth transfer opportunities.
It comes as thousands of Family Offices and high-net-worth individuals accelerate their wealth transfers ahead of the ‘Blue Wave’ with Biden in prime position to win the US Presidential Election.
At the time of writing, Biden requires just 27 electoral college votes to win and has received more than 71.5 million votes in total – setting a record.
The Presidential Election has witnessed a turnout of 66.9% – the highest in over 120 years and while with seven states to play for there is still room for a Trump Victory, Family Offices are starting to consider what a Biden win might mean for their finances.
Biden has pledged to bring in higher taxes on the wealthy by unstitching much of Trump’s 2017 policy and while manifestos are subject to change, Biden will likely increase top federal income tax from 37% to a pre-Trump rate of 39.6%. He will also raise corporate tax from 21% to 28% and estate tax from 40% to 45%.
Biden’s ambition to return estate tax to its 2009 threshold also means lowering the exemption amounts from $11.58 million for estate and gift taxes in 2020 to $3.5 million for the estate tax and $1 million for the gift tax while a reversal of the current step-up in basis rule could jeopardise multigenerational wealth transfer.
The rule currently allows owners of valuable, appreciated assets to retain ownership of the asset until they die while discounting any appreciation on tax since acquisition. The rule which is referred to as a loophole facilitates multigenerational wealth transfer without incurring Capital Gains Tax on the increase in value but is; like much, set to change under Biden.
So, what should Family Offices do to survive the changes to taxation and policy?
Boston and London-based Multi Family Office, TwinFocus, has urged Family Offices to consider how to give away funds as part of their longer-term multigenerational goals and, to take into account if they can actually afford it.
They have advised Family Offices to take advantage of the current benefits existing under President Donald Trump but only if it fits into a longer-term succession plan.
“For the exceptionally wealthy looking to take full advantage of the current lifetime gift exemption, their current concerns should revolve around how much to gift, how to gift it, and who should gift it. There is a myriad of factors to consider such as a potential beneficiary’s age, instilling the responsibilities of wealth upon the next generation, selection of fiduciaries, asset protection benefits, and the size of the family balance sheet.”
Read the full interview with Twin Focus here and in the meantime, join the debate – what would a Biden win mean for Family Offices?