Every new presidency causes us to worry about what might happen, and President-elect Biden has said many worrisome things, especially with regards to taxes.

Although this is not about politics, the fact is that the new president has said repeatedly that he wants to raise taxes raises questions to the economic society. How much, when, and what actions to take are still far into the future, but one that really worries most of us is the so-called “step up” tax changes that he has proposed from as far back as the summer of 2020.

Basically, the change he’s suggesting isn’t one that a lot of people would notice, but it’s one that affects just about everyone, not just the ultra-wealth. Under current and traditional law, assets like a family business are “stepped up” at the time of the decedent’s death to the fair market value then. For example, if the founder of a family business died in August of 2019, the value of his or her business would be assessed in August of 2019. For easy math, let’s say it was $1 million. If the heirs continue to operate the company into 2020 and finally sell it in December of 2020 for $1.2 million, they are only taxed on the change since the founder passed away. $200,000, in other words. In the plan that seems to keep showing up, the heirs would be taxed on the entire value of the business at the sale. All $1.2 million.

Here’s the challenge: there are so many other pieces of any tax puzzle, these smaller pieces often get forgotten about, but in the case of a family owned business, one that is multigenerational, the tax consequences could be very large. Items like this rarely get a lot of press, because it’s a once-in-a-lifetime problem versus a once-a-year problem, like April 15 th.

It’s worth watching and determining a better course of action before losing hundreds of thousands of dollars in taxes in a business you spent years building that was designed to make a better life for your family.

Even if President Biden gets his “wish list” of tax hikes, the reality is, it might take several years to actually get put in place. That’s great, because it gives us time to work together to determine how best to attack the problem and mitigate the tax consequences of passing a business to your heirs.

If you’ve suddenly begun to worry, relax: let’s keep an eye on this and go ahead and schedule a time with us to discuss how to keep more money in your heir’s pockets.