Biden 2025 Budget: Would Change Estate Planning As We Know It

The Biden administration’s 2025 budget would raise taxes on the wealthy and seek to reduce wealth concentration. Transfers of appreciated property by gift or on death would be realization events. Assets in a trust or partnership are marked to market every 90 years. No discount would be allowed for partial interests except to the extent the assets are actively used in business.  Transfers to or from a trust (other than a wholly owned revocable trust) or partnership would also be recognition events. Transfers to a U.S. spouse would not be a realization event but would receive a carryover basis. Transfers to a split-interest trust (CLT, CRT) would be taxable except to the extent of the value of the charity’s interest. A $5 million per person exclusion on property transferred by gift or death would be included. A minimum tax of 25% on total income, including unrealized capital gains, on taxpayers with over $100 million in wealth. The tax for the first year could be paid in nine equal annual installments, and the tax for subsequent years could be paid in five equal annual installments.  GRATs would be required to have a minimum term of 10 years and a maximum term equal to the annuitant’s life + ten years, etc. If a taxpayer creates a grantor trust that is not fully revocable, sales between the grantor and the trust would be taxable. The grantor’s payment of the income tax on the trust’s income would be a taxable gift. Intrafamily transfers of partial interest in property in which the family collectively owns at least 25% be valued based on the interest’s pro rata share of the collective FMV of the interests held by the taxpayer and family. Limit annual exclusion gifts to $50,000. GST exemption would only apply to beneficiaries no more than two generations below the transferor.

Speakers: Jonathan Blattmachr, Robert Keebler, and Martin Shenkman

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