If you have money or assets that you plan to leave to your heirs, it would be prudent to consider having a well-thought-out estate plan. And if you already have an estate plan in place, you need to revisit it regularly and make adjustments according to any new rule changes or legislation. Unfortunately, changes in legislation can impact your estate plan, so you can't just sit back and relax after it's in place.
Earlier this year, Senators Chris Van Hollen, Cory Booker, Bernie Sanders, Sheldon Whitehouse, and Elizabeth Warren proposed the Sensible Taxation and Equity Promotion (STEP) Act. The legislation is similar to the 99.5% Act and works in tandem with President Biden's tax plan.
The STEP Act proposes to tax any property transfer if it has a net gain associated with the property during either lifetime or death. Current rules let assets pass to heirs without capital gains tax on their appreciation in value. Assets also pass to heirs at current market price instead of the owner’s original cost, known as a step-up in basis.
The updated tax regulations would apply to any gain of more than $1 million at death or $100,000 during a lifetime, provided the recipient is not a spouse, charity organization, qualified disability trust, or cemetery trust.
Many people have used the step-up basis method of transferring assets to a trust to avoid paying taxes. The STEP Act would end this practice, making transfers to trusts taxable as well.
Like other potential changes, the STEP Act could impact how you set up your estate plan. If you're looking for an "estate lawyer near me" to help you set up your Virginia estate plan properly, the estate planning attorneys at McCarthy & Akers are here to assist you.
You might think that the $1 million exemption for unrealized capital gains from tax would help most people with their estate plans. But the fact is these days that isn't as much money as it sounds. Though the STEP Act is targeted towards the wealthy, it could quickly impact your estate plan.
Though the STEP Act has not yet been passed in its current form, the reality of estate planning is such that you need to be prepared for any changes. You don't want to wait until it is too late. It's much better to be proactive and contact an estate planning attorney to help you put an asset protection plan in place or help update your current plan.
The STEP Act could make it far too expensive for heirs to keep the inherited property. If the value of your home has increased by more than $1 million since you bought it, your heirs or beneficiaries will be required to pay significant taxes if they want to keep it. Unfortunately, it could be more costly to keep the property than sell it in some cases.
For example, if you own a business that you wish to leave to your heirs and the business property and supplies are valuable, but the business itself is struggling, or only moderately profitable, your heirs will still be required to pay capital gains taxes on any business property that has increased in value by more than $1 million.
You may already have a plan in place to leave property or your business to your heirs, but you should make sure your estate plan is set up correctly in case legislative changes make it challenging to do so if the STEP Act is approved.
If approved, the STEP Act would be retroactive to January 2021. Most of the current proposals listed in the STEP Act will erase or significantly weaken estate planning initiatives. Because the STEP Act is specifically directed toward wealthy families and business owners, it directly targets many more advanced estate planning strategies. However, many middle-class individuals with estate plans could get caught in the crosshairs.
If your estate plan has not been reviewed and updated if necessary, now is the appropriate time to do so. If you think that the STEP Act might impact your estate plan, contact McCarthy & Akers today for a free consultation. Our experienced estate planning attorneys will ensure your estate plan is designed to withstand any changes proposed by this potential legislation.
If you are looking for an “estate planning attorney near me,” look no further. We are the go-to estate planning option in our community. As experienced estate planning attorneys, we can put your mind at ease. Our professional, friendly team of attorneys is prepared to come to your aid, turning your complicated legal situation from a headache into a painless and efficient process.
At McCarthy & Akers, PLC, your needs are our priority, and we make choosing a legal partner easy. Let us help you plan for your future by contacting us for your free consultation by calling (540) 277-9865, or you can schedule an appointment by filling out our online form.
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