Year-End Estate and Business-Planning Strategies for High-Net-Worth Taxpayers by Jeff Mutnik, CPA/PFS

Posted on November 16, 2020 by Jeffrey Mutnik

The people have spoken and elected Joseph Biden to serve as the 46th president of the United States. Under a Democratic administration, there is a very real possibility that existing tax policies will change in the near term, and high-net-worth families, in particular, may see their tax bills increase. With just two months until the new administration takes office and the runoff races in Georgia determine which party controls the Senate, the time is now for individuals and business owners to engage in year-end planning and implement strategies to help shield their assets from the prospect of higher taxes and preserve their wealth for generations to come.

What’s at Stake?

President Trump’s tax bill, passed into law as the Tax Cuts and Jobs Act (TCJA), brought a number of new tax breaks to the nation’s top earners. Effective beginning in 2018, the law reduced the tax rates for corporations and individuals, doubled the estate tax exemption to more than $11 million and provided certain business owners with a new deduction for qualified business income (QBI). By contrast, president-elect Biden’s tax plan calls for increasing taxes on corporations and on individuals with more than $400,000 in annual income while also bringing the estate tax exemption back down to its pre-TCJA level of $5 million (indexed for inflation).

Whether Biden can push through his proposed agenda and impose higher taxes on the affluent depends on the results of the early-January runoff elections in Georgia. If even one of the two Republican senators can retain their seats and ensure Republican control of the Senate, it is unlikely Biden’s plan will become law, at least in the next two years. However, if Georgia voters flip those seats, Democrats may control both the House and the Senate, increasing the likelihood that taxes on the ultrarich will rise in the future.

What Can Wealthy Taxpayers Do to Prepare Now for Higher Taxes?

Engaging in year-end planning to reduce your tax liabilities traditionally involves accelerating deductions in the current year and deferring income to the next year. However, as is the case with most wealth-preservation strategies, the actual plan you adopt depends on your unique circumstances, needs and goals as well as the broader economic and political environment at a particular snapshot in time. For 2020, your planning will encompass multiple years to lower your total potential income-tax costs over such period.

Based on the economic impact of this past year’s COVID-19 health crisis and the prospect of higher taxes under a Democratic president, affluent taxpayers should consider reversing their typical year-end tax-planning activities by accelerating income and capital gains to the current year and deferring deductions to 2021. These actions will allow wealthy individuals to take advantage of existing low-tax rates and historically low-interest rates while allowing them to maximize the use of deductions to offset future income that may be subject to higher tax rates.

Some of the tax-efficient estate-planning strategies to consider implementing before the end of this year include the following:

In all matters involving tax planning, individuals and businesses should meet with their trusted advisors and CPAs to ensure that the strategies they consider for minimizing tax liabilities also meet their unique short and long-term goals.

About the Author: Jeffrey M. Mutnik, CPA/PFS, is a director of Taxation and Financial Services with Berkowitz Pollack Brant Advisors + CPAs, where he provides tax- and estate-planning counsel to high-net-worth families, closely held businesses and professional services firms. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via email at