Rich Americans who fear higher taxes hurry to move money now

Rich Americans are rushing to make large transactions before the end of the month, trying to get ahead of any moves next year by President-elect Joe Biden and Democrats in Congress to raise taxes or close loopholes.

Some financial advisers say they’re busier than ever in the last weeks of 2020, especially with helping clients transfer wealth to the next generation tax-free while they still can. Appraisers, who are crucial for valuing assets used in these estate planning strategies, have been inundated.

Requests for property appraisals have quadrupled at New York firm Miller Samuel Inc., President Jonathan Miller said. By late November, he had to start turning away clients.

"We physically can’t handle all the year-end deadlines at this point," Miller said.

The year-end frenzy is a surprise to many advisers, because Republicans did better than many expected in congressional races. The results suggested Biden may have a difficult time fulfilling campaign promises to raise trillions of dollars in new revenue from the wealthy.

‘Very Difficult’

Two runoff elections in Georgia on Jan. 5 still give Democrats a chance to win 50 seats in the Senate, affording them control of the chamber with Vice President-elect Kamala Harris casting tiebreaking votes.

Even if Democrats win both races in Georgia, "it’s still going to be very difficult for the president-elect to really get significant tax reform done with a split Senate," said Benjamin Berger, a partner at RSM U.S. and co-leader of the accounting firm’s national family-office practice.

Nonetheless, tax changes are still possible in 2021, and the Biden administration could also try to close the many loopholes that make the U.S. estate and gift tax easy to avoid. "I can see a situation where Treasury issues regulations that make it more difficult to do effective estate planning," Berger said.

The 2017 Republican tax law signed by President Donald Trump doubled the amount the wealthy could pass to heirs without paying the estate and gift tax, to $11.58 million for individuals and $23.16 million for couples this year. That and other provisions of the law expire in 2026, giving the rich another reason to make moves sooner rather than later.

Gifting Strategies

Before the election, "so many clients had already started looking at gifting strategies," said Lisa Featherngill, head of legacy and wealth planning at Abbot Downing, a unit of San Francisco-based Wells Fargo & Co. "We’re telling them don’t take your foot off the gas."

The main reason for rich taxpayers to make moves by Dec. 31 is the threat that tax changes under Biden could be retroactive to the beginning of 2021. Many advisers are now telling clients that seems less likely, with tax hikes occurring in 2022 if they happen at all.

Still, Laura Zwicker, chair of the private client services group at Los Angeles law firm Greenberg Glusker, said she’s busier "than I have ever been" with a surprising number of new clients coming in the weeks after the election looking to finish transactions this year.

"Estate planning is emotional," Zwicker said. "Clients want to take advantage of the current law, which many have internalized as having been in place forever."