March 19th 2024.
On March 11, President Biden made a big announcement about his proposed budget for the year 2025. This budget has the potential to affect the way estates are taxed, which could have a significant impact on individuals' wealth. Its official title is “General Explanations of the Administration’s Fiscal Year 2025 Revenue Proposals,” and it outlines Biden's plan for increasing taxes on the wealthiest individuals in the country, including those who will inherit large estates. While these changes are not set in stone yet, as they still need to be approved by Congress, they could bring about major changes in how wealth is distributed in America.
The main goal of these proposed changes is to promote a more equal distribution of wealth across the nation. According to Forbes, the additional tax revenue would likely be used to fund social programs and address the wealth gap that disproportionately affects communities of color. However, for those who stand to lose the most from these changes, Forbes suggests taking preemptive measures to protect and maximize their assets.
Biden's plan includes nearly doubling the capital gains tax rate, which had been lowered during the previous administration. Any income over $1 million would be taxed at ordinary rates of 37 to 39.6 percent, a significant increase from the current rate of 20 percent. In addition, the proposal also includes new taxes on gifts and inheritances. However, these would only apply to wealthier individuals, as there is a $5 million exclusion. It's worth noting that this exclusion also covers collectibles like expensive artwork.
Given that this is an election year, there is still some uncertainty about who will be in the Oval Office when these proposed changes take effect. Therefore, it's important for individuals to start planning now to protect their assets and minimize the impact of potential tax increases. The publication referred to Biden's budget as "harsh" and recommends creating trusts and making gifts to loved ones before any new laws are put in place. Luckily, there is still some time before any concrete deadlines, with the end of the year being the most likely timeframe.
When it comes to financial planning, flexibility is key. It's essential to have a solid strategy in place to make the most of your money and valuable assets, especially during times of uncertainty. Incorporating tax planning techniques into your financial management can help safeguard your wealth, regardless of any potential changes in tax rates and regulations. It's always best to stay informed and prepared, no matter what the future may hold.
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