Deal Stampede
The 2020 election is one risk among many facing closely held businesses, but it gives advisers more ammunition to persuade clients that they shouldn’t miss the chance for a lucrative exit.
If Democrats win the White House and both chambers of Congress, the wealthy could face a number of expensive tax changes. In addition to targeting wealth and capital-gains income, Democrats, including Sanders and Biden, have proposed changes to estate tax rules that would make it harder for the wealthy to pass on fortunes to children, grandchildren and beyond.
Democrats could also reverse provisions of the tax overhaul enacted in late 2017. The law boosted many companies’ profits and valuations by slashing the corporate tax rate and creating a controversial 20% break for owners of many other businesses.
Then there are regulatory matters that affect particular industries. Many business owners are fans of Trump’s hands-off approach to issues including environmental and labor rules. A Democrat in the White House would almost certainly seek to reinstate and strengthen regulations that Trump rolled back and wouldn’t need Congressional approval to do so.
“If there’s an administration change, the risks are bigger than taxes,” Rowe said. For his clients, “it’s a combination of those things that is getting them a little spooked.”
While it may feel far away and unlikely now, a big Democratic victory in November could trigger a stampede of deals as rich clients grab one last chance to exploit the current rules. Estate planners, financial advisers and lawyers said they would expect an extremely busy several weeks after a Trump loss.
“If a Democrat is elected,” UBS’s Dillon said, “it’s going to be a madhouse.”
—With assistance by Laura Davison, and Heather Perlberg
This article was provided by Bloomberg News.