Understanding Joe Biden's Generational Wealth Transfer

Most people know that Joe Biden has a unique tax plan that he would put in effect if elected president. However, the majority of people also aren’t fully informed on all that this tax plan entails or what it means in terms of generational wealth.   

The basic thing to know, though, is that the plan would ultimately raise taxes for high income households. One notable taxation, for example, is a higher individual income tax rate for households that have taxable income of over $400,000.

In terms of estates, Biden’s plan is to tax unrealized appreciation of assets that are passed on at death. Right now, the “step up in basis” method allows people to greatly minimize taxation anytime they sell holdings that they’ve inherited, but Biden’s plan would do away with this option. Instead, the transfer of assets after a death will be taxable, as will any gains made from selling inherited assets.

The long-term capital gains tax, right now, is at 20% for single households that have over $441,451 in taxable income or $496,601 for married couples filing jointly. However, Biden would increase this tax amount, so not only would people be subject to a new tax, but also to a higher one than normal. The option to “gift” estates or other assets also won’t be an effective loophole.

As you can imagine, some people, especially those with much to lose, are upset about Biden’s plan. Others, however, see it as a good thing and as a way to level the playing field financially.

Regardless of where you stand, a lot is still up in the air right now. But, if you do plan on transferring assets at some point in the future, you may want to work with a tax professional. They can offer you options that can make the transfer a bit easier and perhaps even legally get you out of some taxes, even if Biden’s plan does go into effect.