Potential Inheritance Tax Changes

June 18, 2021

President Biden’s proposed tax changes have been widely discussed since they were announced earlier this year. While most of the proposals are aimed at the wealthiest individuals and families, there is one in particular that could prove costly to middle class Americans as well. It is the plan to tax inherited assets at the original cost basis rather than the stepped-up basis.

For example: A family-owned business started in 2001 and had a $0 basis. Today, that business is worth $500,000. If the estate law is changed and the owner dies today, the new owner would now be on the hook for $500,000 in capital gains. Versus no estate law change where the new owner would now have a basis of $500,000 when inherited.

Those who inherit successful businesses with the intention to sell, this change to the tax code could cause a huge increase in the federal tax. Selling inherited assets and controlling your taxable gain is tricky and a well-developed plan should always be made in advance. If you are considering selling inherited assets or believe you may be receiving an inheritance soon, reach out to us today to begin putting a plan in place to control your tax liability!

Carol Dixon, CFP® & Kevin DeRosa, CRPC®

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