Five Tax Planning Strategies for the Ultra-Wealthy

Investing is simple, but taxes and estate planning are not. With the many tax proposals pending, they will get less simple. Though those proposals don’t have much impact on the merely wealthy, with say a $10 million net worth and income below $1 million, some changes would have huge consequences for the very wealthy.

A few of the major proposed changes are:

1. Increase ordinary income tax rates to 39.6%.

2. Long-term capital gains (LTCG) tax rates to be set to ordinary income rates for those with over $1 million income, possibly retroactively.

3. Elimination of the step-up basis on inherited assets for over $1 million per person.

4. Lowering the estate and gift tax exemptions to $3.5 million and $1 million, respectively, from the current $11.7 million per person, with potential corresponding rate increases.

5. Eliminating grantor trust benefits and/or forcing income tax recognition on certain events or at certain intervals (e.g., assets transferred by gift and at death will be deemed sales).