As a result of President Joe Biden’s efforts to find resources to fund his social programs, America’s richest may soon face higher taxes, especially if some ways to transfer wealth from one generation to the next are eliminated. avoiding taxes.

President Biden’s administration has made no secret of the belief that gains from stocks or other investments should not be taxed less than the profits made by sweat, as is currently the case.

Gains from investments in stocks and other forms of ownership are taxed at a rate of up to 20%, while income from direct labor can have a tax rate from the federal government of up to 37%.

But raising taxes is a very difficult attempt in Washington.

The administration is trying to expand the list of gains from stocks / investments that fall into taxable income categories and plans to use these funds to support programs to help American families by funding nurseries and kindergartens, as well as education for children and young people, as well as health care.

‘People want to understand and prepare’

The initial version of the plan is being analyzed in recent days and it turns out that it envisages even deeper changes than originally thought.

In March, the Treasury Department made public a proposal to eliminate a categorization of inherited income in a form of tax evasion. Changes in family trust management are also envisaged, a way to organize inheritance for heirs.

It is reported that accountants specialized in preparing documentation on the holdings that will benefit the heirs have been contacted by many wealthy people who want to know if they have other ways to “protect” the holdings from taxation.

“I have never been so busy with work in 25 years of my career,” says Randall A. Denha, who has a firm that organizes property documentation for heirs. “Many people have questions, especially those who want to leave considerable wealth to the heirs, as people do not know how their properties can be affected in this period.”

The “basics” are explained

Under current law, holdings that have increased in value and are inherited from one generation to the next often benefit from a “special treatment” that protects them from large amounts of taxes.

Someone who bought a Berkshire Hathaway stock in 1980 paid $ 315, but today a single stock sells for $ 420,000. If the owner sells today the shares he bought in 1981, he would have to pay tax on the extra amount he provided over the “base” price he paid.

If the owner dies before selling this share, the heir who becomes the owner is released from the obligation to pay value added tax. If he sells the stock for $ 420,000, he pays no taxes.

By eliminating this special treatment for heirs, suddenly hundreds of thousands of dollars will be taxable.

Problems of the Rich

The changes the administration is considering will not affect most Americans. The proposals exclude profits of up to $ 1 million from investments, a much higher than the average legacy left by Americans.

For the super-rich, one way to protect holdings from taxation has been to put them in a trust, which is a legitimate entity that holds holdings in the interest of the beneficiaries but without allowing them to become direct owners. Some of these trusts, known as “dynasty” trusts, have existed for generations, allowing the super-rich to evade taxes for decades.

If the opportunity currently enjoyed by heirs to avoid value-added taxes is eliminated, the rich would open up trusts, as the preferred choice to avoid taxes. The Biden administration has foreseen this.

The reason, says one expert, is simple: “Trusts never die.” The Biden administration therefore does not want this regulatory loophole to continue to exist.

New regulations for trusts

Under current law, holdings that are placed in a trust are not taxed as their value increases. Even if the owner decides to withdraw some holdings from the trust, for example transfer some shares or bonds to another account, the holder does not need to pay taxes until he sells those holdings.

The administration of President Biden proposes that at this stage of the transfer of holdings from the trust to another account the owner pay tax on profits.

The plan also stipulates that profits accrued from trust holdings are taxed every 90 years even if they are not drawn from the trust. So the statement that “trust never dies” would no longer be valid because every 90 years profits would be taxed once in a lifetime (90 years represents a longer life than the American average).

Uncertain future

Even if these proposals are approved, experts say, their implementation is not easy.

“You have to allow people to pay taxes in various ways when the time comes,” says one expert, adding that the heir may not know what exactly he owns and suddenly finds himself facing substantial taxes, but no cash for paid.

Also, analysts add that there is no guarantee that such measures would have a long life. The next administration may cancel them.

“Even the most ardent supporters want these proposals to be weighed well, as taxes from these changes are projected as financial resources to support permanent programs,” said Garrett Watson, an analyst at the Washington-based Tax Foundation.