2020 ELECTION/ Death Tax Quagmire
Whether you are Republican or Democrat, you need to look at this November’s election
and determine the potential death tax impact of victory by Donald Trump or Joe Biden. Since
2000, the death tax exemption has increased from $675,000 (and a top tax rate of 55%), to an
exemption now at a level of $11.58 million (and a top tax rate of 40%).
When the last increase took place, under the Trump Administration, Congress allowed the
increase with the stipulation that it would “sunset” (revert back) to the $5.6 million exemption and
the top rate of 55% after December 31, 2025.
Candidate Biden has proposed changes which would cause the exemption to be reduced to
$3.5 million with a top death tax rate of 70%. Under a Trump Whitehouse, the exemption will
continue as long as possible with the promise that the death tax be permanently repealed.
While the President is an important office, you also need to consider control of the Senate.
Major changes require the approval of not only the President but also support from the Senate and
House to move any law through. At this time, the House of Representatives is and will likely
remain predominately Democratic (based on history).
In summary, a Biden presidency will likely result in a $3 million free transfer at the time
of death with a potential tax rate of 70% on the excess. Whereas a Trump reelection will allow an
$11.58 million exemption with a top rate of 40%. Note: I have not seen any tax proposals from
Also, last year, the Internal Revenue Service published regulations stating they would not
impose transfer taxes on gifts made in prior years. What this means is, if you have the ability to
transfer, you should do this before December 31st. In fact, this process should be started now
because the $11.58 million may be gone as of December 31st. Trying to get in to see the attorney
to develop an estate plan or trust to transfer wealth will be nearly impossible if you do not
implement a potential plan between now and November 30th. It would be like going to a bakery
on a Sunday, looking for your favorite pastry. There would not be anything left. Those lawyers
who have the competence to provide you with a solid plan would not have the time available to
handle “last minute” clients.