When laws change, it’s understandable you would Google “estate planning attorney near me” to find the support of an estate planning attorney. With the proposed Sensible Taxation and Equity Promotion Act (STEP Act) on the horizon, it’s vital to find someone who understands the provisions of this potential new law and your unique situation. The support of estate planning lawyers can be instrumental in helping you pivot and adapt to advanced estate planning issues.
What Is The STEP Act?
In early 2021, multiple representatives proposed the STEP Act, similar to the 99.5% Act that works alongside Joe Biden’s tax plan. It proposes to tax property transfers either during lifetime or at death when a net gain is associated with that transfer. Right now, when a person passes away with assets that have improved in value over their lifetime, beneficiaries or heirs will receive them in an estate plan. At that time, the beneficiaries do not have to pay what is known as capital gains taxes on those assets that now have a higher value.
What Would Happen at Death with the STEP Act?
The STEP Act proposes to create a capital gains tax at death by closing what is known as the step-up in basis loophole. A $1 million exemption for crude capital gains at death in today’s economy is not very high, which means that the STEP Act may impact the middle class significantly. You should consider these impacts along with the possibility of significant consequences from the 99.5% Act, which would reduce estate tax exemptions to $3.5 million and gift tax exemptions to $1 million. These changes could affect your current estate plans, which may require an update.
What to Know About the STEP Act
The STEP Act contains several critical components. We encourage you to consider them individually and in conjunction with one another when conducting your estate planning.
High Income Filer Changes
First, the STEP Act will repeal aspects of the Tax Cuts and Jobs Act for high-income filers with a 20% deduction on qualified business income. It will also raise the corporate income tax to 28%, impose a 12.4% social security payroll tax for wages beyond $400,000, and create a corporate minimum tax. The difference between the current minimum tax and the proposed corporate tax represents a 33% increase.
Corporate Minimum Tax Changes on Book Income
Furthermore, the STEP Act creates a corporate minimum tax on book income. Right now, special deductions, write-offs, and loss carryovers explain much of the difference between book income and taxable income. However, this new change would affect corporations with a minimum of $100 million in book income and currently carry the 15% minimum tax rate.
Other Changes for GLTI and Child Tax Credits
Two other significant changes associated with the STEP Act include:
- Doubling the tax rate on global and tangible low-taxed income and impose it on a country-by-country basis
- Temporarily increasing the dependent credit and the child tax credit generosity
Consult with an experienced estate planning lawyer to increase your chances of success and protect your assets in all of these circumstances.
What Does This Mean for My Current Estate Plan?
One of the best reasons to work with Massachusetts estate planning lawyers is to make changes quickly when the law alters the effectiveness of your existing strategies. If approved, the STEP Act would be retroactive to January 2021, which means that you would need to speak with an experienced estate planning lawyer in Massachusetts to discuss possible updates to your plan if any of the above provisions reduce your estate plan’s effectiveness.
Tax and estate planning become higher priorities and take on a more considerable significance in your life when there are legal changes on the table like the STEP Act. In addition to updating your material to prepare for the STEP Act, establishing a relationship with estate planning lawyers in Massachusetts is the only way to ensure you remain up to date as other details emerge about this law.
Many of the current updates proposed by the STEP Act will eradicate or weaken your other estate planning initiatives since the law targets many more advanced planning strategies used by wealthy families and business owners. If you have not updated your plan in a while, or have never implemented an estate plan, now is an appropriate time to meet with estate planning lawyers in Massachusetts to get personal support for crafting a current and adaptable estate plan. You can leave a legacy and streamline the asset transfer process by thinking ahead.
The Law Offices of Kimberly Butler Rainen: Planning for Families, Planning for Life
If you’re ready to learn more about the STEP Act and how you can mitigate its potential consequences for your estate plan, contact the Law Offices of Kimberly Butler Rainen in Andover, Massachusetts, today. We have your best interests at heart and will help you ensure that your family is taken care of. Estate planning attorney Kimberly Butler Rainen’s knowledge base is second to none. She has worked with many clients to secure their future and their family’s well-being through multiple changes in the law, and she looks forward to serving you. Take the first step by scheduling a brief “get to know you” call at 978-409-1928 or complete our online form.
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The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.