The more that advisers to the wealthy examine Biden’s proposals, the more they’re realizing how significant the changes could be.

“What they’re doing is creating a whole new tax regime,” said Richard Greenberg, a lawyer at Greenberg & Schulman based in Woodbridge, New Jersey. “We’re going to have to do a lot of re-examination of a lot of techniques,” he said, and that means not just reconsidering future planning but looking at “what we’ve done in the past” for clients.

Unmentioned by the White House so far are any changes to the U.S. estate and gift tax, a levy of as much as 40% affecting only very large fortunes that was created more than a century ago to break up dynastic wealth. But, by targeting the powerful tools that allow the rich to avoid the estate tax entirely, the Biden administration may end up causing an even bigger headache for the wealthy.

Tax-Planning Techniques
Advisers interpreting the Green Book can’t be sure exactly how the provisions will work in practice. The final language in any tax bill will be up to Congress, and, assuming legislation is eventually enacted, some details might not be even settled until the IRS issues regulations.

In any case, the proposal to tax property transfers into and out of trusts “would significantly change several current planning techniques,” said Karl Swaidan, a partner at Hahn & Hahn, adding he worries about unintended consequences. “The rule appears vague and may be another example of legislation casting too wide a net in addressing specific techniques.”

While the wealthy and their advisers wait for details of Biden’s tax package to firm up, there’s little they can do except worry how the provisions might affect them.

“The underlying feeling at the client level is uncertainty and fear because of the lack of predictability about what the tax laws hold,” said Megan Jones, a tax law attorney at Pillsbury Winthrop Shaw Pittman LLP. “I’ve used the technical term ‘freaking out,’” she joked. “Clients have a lot more questions and a lot more concerns.”

This article was provided by Bloomberg News.

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