While nothing has passed in Congress, six different proposals would affect how clients save, distribute, and manage taxes on their assets. Here are some basic key points.
Congress has been busy. Here is a short list of the six proposals with basic key points that might affect clients. The corporate tax proposals tend to affect small and/or closely held businesses.
American Jobs Plan and American Families Plan. Also referred to as the “Biden Tax Plan,” these two Plans would increase income taxes on certain individuals and corporations, as well as limit the amount of assets eligible for a step-up in basis.
Sensible Taxation and Equity Promotion (STEP) Act. Senator Chris Van Hollen’s STEP Act requires realization of capital gains at gift or death, with a $1,000,000 exclusion ($100,000 may be used during lifetime). Certain grantor trusts would be required to periodically “mark assets to the market” and immediately recognize gains.
For the 99.5% Act (S994, H.R.2576). Senator Bernie Sanders' changes would reduce the estate-tax exclusion to $3,500,000 ($7,000,000 for Married Filing Jointly), with a lower exclusion of $1,000,000 for gifts. It also limits annual gifts to $10,000 (per donor limit for certain gifts to trusts and pass-through entities), significantly limits minority discounts, and requires most grantor trusts to recognize gains in certain situations (similar to the STEP Act).
Securing a Strong Retirement Act of 2021 (SSRA) (H.R. 2954) and Retirement Savings and Security Act of 2021 (RSSA) (S1770). Nicknamed “SECURE 2.0,” these two acts offer benefits primarily to those saving for or in retirement and/or taking retirement income.
A challenge: only SECURE 2.0 has bipartisan support, as have past retirement enhancement proposals. The SECURE 2.0 provisions would add opportunities for some pre-retirees to increase their savings and allow retirees more flexibility in preserving assets and creating late-life income, which are goals supported by both parties. This bipartisan support suggests that SECURE 2.0 is the likeliest to move forward. More to come as the year progresses! Be sure to watch this space for more information.
For more information on retirement-planning strategies, please contact the Retirement Strategies Group at (800) 722-2333, or email us at RSG@PacificLife.com.
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