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The American Families Plan and Your Estate - YouTube
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this is american dreams a program where
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we interview
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thought leaders and entrepreneurs and
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bring their ideas to you in real world
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context
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welcome today's show i'm visiting here
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today with meredith
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bushnell meredith good to have you with
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us hi alan thank you for having me
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so meredith is a leading estate planning
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attorney located in the san francisco
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bay area but i'm sure the practice
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extends well beyond the borders of
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california
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and before we get into what's going on
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in that world today
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meredith can you give your background of
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how you came to be where you are today
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yeah absolutely um so today i am a
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partner
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at venable which is a national law firm
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in san francisco and i am co-chair of
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our west
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coast estate planning group um
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and i started actually over 20 years ago
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as a corporate and partnership tax
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lawyer
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and i focused in that area for
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approximately six years
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but when i went back to school to get my
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llm and taxation i
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really fell in love with the trust and
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estates and charitable planning
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uh parts of the tax law and so as soon
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as i had an opportunity to transition i
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did so
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and i've been focusing on uh wealth
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transfer planning
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and planning for all of the other
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things that go along with being wealthy
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for you know over 15 years now
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and well i've had personal experience of
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working on mutual clients with meredith
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and i can
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i can attest to the fact that uh you're
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excellent in terms of that
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the the field of estate gift planning
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and
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i appreciate all that you bring to the
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to the
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client service itself meredith in the uh
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in the world of estate and gift tax
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there's much going on but
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let's start with a discussion on
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infrastructure
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bill and and what that's all about and
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how we need to pay attention
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okay great yes so biden um
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came in with two big this year with two
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big policy programs
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one is the traditional infrastructure
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plan which is known as the american jobs
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plan
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and the other is a human infrastructure
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plan
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and that's known as the american
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family's plan
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the price tag for the plans as biden has
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conceived them
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is extraordinarily high uh the
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infrastructure plan is
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on as biden conceived it was going to
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cost about 1.67
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trillion dollars and was to be paid for
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in part by raising the corporate tax
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rate from 21 to 28 percent
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the human infrastructure the american
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families plan
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is focused primarily on education
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paid leave assisting families and
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the price tag for that as originally
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conceived was
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721 billion dollars
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and that plan is was conceived of to be
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paid for
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by tax increases on the wealthy
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and when we think about the wealthy in
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biden's mind anyone earning over
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400 000 a year is wealthy and
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that goes back to a campaign promise he
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made which was that he would not raise
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taxes
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on households earning less than four
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hundred thousand
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so that four hundred thousand you'll see
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play out in many
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of the proposed tax increases included
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in the american family's plan
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um what's interesting though in watching
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the infrastructure plan that is further
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along than the family's plan
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and as we see in the news almost every
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day now
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that plan is evolving from
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where biden started
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the problem that biden is facing is that
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the democratic party
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has a very progressive wing and a more
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conservative wing and even within
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his own party there's not agreement on
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what should be enacted and how it should
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be paid for
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so initially there were two approaches
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on the table for the infrastructure bill
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even though both parties agree that
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infrastructure is important in a policy
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priority
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so initially there was a thought that
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the democrats acting alone could get
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some of this done
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through budget reconciliation however
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that just has become tricky
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because it would require enough spending
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to satisfy the progressives
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and not too much for the more
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conservative democrats
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and so what we've seen evolve this month
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is this bipartisan approach with the 10
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senators
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that it was just announced today that
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they think they've reached a framework
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of a deal with the white house yesterday
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so that's the latest breaking news on
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the infrastructure
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and it does fall short of biden's
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initial vision as outlined in the
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american jobs plan
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it's much more narrowly focused on
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physical infrastructure
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and uh it's not going to
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include as many of the climate
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initiatives that the progressive wing of
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the party wants
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so hopefully that will come to fruition
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um and it sounds like it's not going to
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include that large tax
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increase on corporations so that's where
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we are
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on infrastructure it's interesting and
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it seems like every day it's like a
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moving river flowing
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and evan tides and uh yeah so so
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uh one of the things that uh you know
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there's two things looking at one is an
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income tax the other is an estate and
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gift tax
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so how would you advise clients today
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of is there anything that they should be
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doing
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yeah well that's a great question and
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that leads into
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the american family's plan and i think
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what we learn
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by looking at the the infrastructure
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bill
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is that what is in the green book what's
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in biden's budget proposal
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is not likely to be enacted as proposed
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right and so as we look at what's going
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to happen when they move
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to address the human infrastructure bill
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the americans
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american families plan i think it's
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important to
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talk about what was in the green book
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um with the with the understanding that
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that is
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very likely not what's going to be
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enacted and as we've seen this
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compromise process
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with the traditional infrastructure bill
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we are going to see something
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similar with the human infrastructure
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bill the american families plan
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and we're also going to see the same
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tension play out between the democratic
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party
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and i think that they're going to have
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to have republicans on board which means
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that what was in the green book is
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really probably going to get
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tapered back so would it be helpful to
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go through the proposals in the green
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book
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sure yeah let's talk about that and also
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more concerning of
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i've heard some enactment dates going
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all the way back to
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april retroactive and then i heard other
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things of well let's just wait until
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next year
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to to play along this act so maybe kind
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of help us understand these two dates
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yeah those are
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really important um topics
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so the plan includes a proposed increase
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or a roll back to the pre-2017
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tax act income tax rates right so we'd
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go back to a 39.6
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tap bracket that would be effective in
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2022 and it would apply to
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income over 450 to 700 000 for single
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filers
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and slightly more for heads of household
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and joint filers
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it would increase the capital gains rate
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to 39.6
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for taxpayers with over a million in
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income
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effective as of april 28 2021.
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so that is the one retroactive
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piece of the proposal and the thought
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process being there right is
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is that rate they wanted to lock in
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so that they wouldn't affect people's
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behavior in terms of decisions to sell
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or if people knew that that date was
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going to be prospective everyone would
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be rushing
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to sell assets before it took effect and
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alan i'm sure you're getting a ton of
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questions from clients on this
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particular issue
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well i think there's there's not
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questions it's more panicking tell us
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what to do and
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and and even you know coming through the
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door
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uh people are kind of like you know
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there becomes a certain period of time
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when
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you know it's okay to pay some tax and
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then when the tax rate gets too high it
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completely changes behavior
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right well and think about the people
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who have
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transactions or deals pending right now
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right that started them and priced them
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based on an understanding of the tax
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rate that
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may may not apply right if this
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retroactivity goes through
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which changed the economics right so um
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the in that the tandem piece of that
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proposal
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which does not go into effect until 2022
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is the repeal of the basis step
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up and this is really critical from an
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estate planning perspective and this is
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a
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this is the probably the biggest estate
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planning
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piece of the proposed legislation
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and under this proposal you know we've
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always enjoyed historically a basis step
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up on death in appreciated assets
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and we've also enjoyed the ability to
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gift assets without
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recognizing any gain on that gift
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well this law would
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tax all appreciation in assets that are
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transferred by gift during your lifetime
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or at death to the extent that the
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appreciation
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exceeds a million dollars combined so
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it's a similar concept
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to the transfer tax exclusion but it
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would apply
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to this uh deemed sale the deemed gain
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on gift and it would only be a million
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per person
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um this is massive
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what about the people that are saying
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well you know i'd already set up
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a big charitable component so i'm going
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to give all my appreciated assets
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into a foundation or into the charities
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of my choice can they still do that and
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and have that in place they can't that
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is one of the exclusions so the
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exclusions to this
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the gain provision are gifts to spouses
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and gifts to charity there's also a
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250 000 exclusion on a transfer of our
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primary residence
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so similar to what we see now under
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current law when you sell a residence
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it's that same concept
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um and then finally
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there's going to be you're still going
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to be allowed to exclude
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the gain on qsbs so the 1202
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qualified small business stock
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exclusions will continue to apply at
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least under
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the proposal on the grain book
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now another thing that is very common
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out there when we go into 1202 is
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there is a little bit of i'll call it a
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loophole or an oversight to where
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you know uh the parents could set up
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trusts on behalf of their children
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and transfer assets into these trusts
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and then
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double double down on the 10 million
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dollar
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exemption um part of the proposal
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and this is this is the question of that
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they had started to eliminate
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some of these estate planning techniques
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um going back to the 1202 to the
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children
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gift is that still valid is it is it
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still a valid uh
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yeah and so that is not an extreme
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detail in the green book but there is
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nothing
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um specifically addressing that in the
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green book but ellen that's a great
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point i mean what we see in the green
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book
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is much narrower actually from an estate
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planning standpoint than what we had
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seen
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in the sanders proposal earlier this
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year and in the van haulin build that
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were that was proposed earlier this year
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so the green book is actually much
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narrower
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on the estate planning changes and so
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the biggest
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uh proposed change is this capital gains
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triggering on the gift or at death
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and again this is one though where we're
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going to see some issues in the
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democratic party over this because
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we're seeing senators from more rural
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areas
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push back on this because it will impact
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family farms
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and small businesses and what the green
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book
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included to try to alleviate that
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was that they could pay the taxes on
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these gains
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over a 15-year period um but we're
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already hearing from some senators um
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including senator tester from montana
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that that's just not going to be enough
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to make it palatable for him
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and his farming constituents so again
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this is something that's going to play
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out but
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you know to your initial question or
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what are we doing
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from an estate planning perspective you
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know i would say
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there is going to be some plan that's
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going to be enacted
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and it is going to have to be paid for
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somehow right
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we know that we know what biden has
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proposed
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and you know i think what ultimately
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is passed will be a scaled-back version
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of that
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but if you have clients that we're
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planning on or are interested
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in making gifts of capital assets that
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have
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appreciation or of appreciated assets
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they should absolutely do that sooner
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rather than later
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i mean just taking for example the fact
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that if they
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make a gift this year there would be no
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appreciation no no recognition of gain
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on that appreciation at the time of the
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gift versus
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under this proposal if they do it next
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year they're going to have to be paying
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tax when they make that gift on this
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appreciation
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and what's important also to remember
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is that we still have an 11.7
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million dollar exclusion amount from
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transfer tax
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and that is going to automatically go
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down at the end of 2025.
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um the current green book proposal does
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not
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reduce that sooner but as
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the family's plan goes through this
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legislative bargaining process
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that could come back onto the table in
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other words
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they could bring back as as a you know
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in horse trading they could bring back
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the concept that they would reduce that
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11.7 million dollar exemption amount
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sooner than you know 12 31
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25. you know this
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this is excellent advice and you know we
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covered quite a bit of ground here
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but i think the most important thing
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with this today's message
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meredith is how do people reach out to
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you for more information
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um people can feel free to email me um
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mr
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bushnell b-u-s-h-n-e-l-l at venable.com
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v-e-n-a-b-l-e dot com or they can give
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me a call
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at three two two 415-343-3224
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and again i like to give that
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testimonial having work with meredith
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i'm
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most appreciative for you coming on
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today and sharing this insight
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you
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