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Bloomberg
During his campaign, candidate Biden promised higher taxes for the rich. Now that the Democrats are in control of Congress, President Biden is preparing to hold out.
If the government is able to pass its economic plans, it would be the first major tax hike in the United States since 1993. The tax plan provides a tax hike for businesses and wealthy Americans, and includes relief for middle-class households. According to Bharat Ramamurti, deputy director of the National Economic Council. The government is committed to encouraging large corporations to kickstart their U.S. investments while reaching out to those who experienced a windfall during the Covid-19 pandemic.
Forbes spoke to the nation’s top consultants on our rankings to find out how they’re preparing their clients for the inevitable changes. Here’s what they had to say:
Randy Garcia, Founder of the Investment Counsel Company
The Investment Counsel Company
Randy Garcia,
Founder of the Investment Counsel Company
Las Vegas, Nevada, assets under management: $ 1.3 billion
Garcia has told clients that tax increases are not a question of “if” but “when,” an attitude he has taken since the election results were announced. He has proposed paying long-term capital gains on stocks this year before any possible changes to the rules are made. Some of his clients, who are more pessimistic about potential tax changes, are concerned with Roth IRA conversions and fear that the tax-free benefits will no longer be transferable across generations.
According to Garcia, recent comments from the Federal Reserve and Chairman Janet Yellen on the fragile economy mean that major tax changes may not be imminent. He looks out for changes the White House and IRS can make without Congress. The most important ones include dealing with reviews in trusts used to transfer assets, as well as possible changes to a popular tax strategy, 1031 exchanges that allow a reinvestment of property proceeds to be reinvested tax-free within certain restrictions.
When it comes to allocations and portfolios, Garcia says “horse is already out of the stable” as much of the market is tuned to the same rumble that he and his clients have heard.
Randy Conner President of the Churchill Management Group
Churchill Management Group
Randy Conner President of the Churchill Management Group
Los Angeles, California
Assets Under Management: $ 6 billion
Conner was surprised that this problem was overshadowed in the minds of customers and markets by the introduction of Covid vaccines, massive economic stimulus programs, and optimistic outlook for GDP in the second half of the year.
He expects small cap stocks to decline when this legislation is passed and hits the markets. This is the reverse effect of what he saw under the Tax Cut and Jobs Act of 2017.
For clients who took the market downturn in March last year as an opportunity to buy, these gains are approaching classification as long-term or short-term capital gains. The timing of possible tax changes and the age of those investments will guide the decision on when to realize those gains nearly a year after what Conner called a “really good tax harvest opportunity.”
Conner says of the tax hike gossip, “If this surprises you, you’ve been sleeping.”
Jeff Grinspoon, Partner, VWG Wealth Management
VWG Wealth Management
Jeff Grinspoon Partner, VWG Wealth Management
Vienna, Virginia
Assets Under Management: $ 1.4 billion
Grinspoon said some of its clients sold their stores over the past year to stay ahead of potentially increased capital gains taxes.
While the current inheritance tax exemption of $ 11.7 million per person is set to decrease to $ 5 million in 2025, Grinspoon anticipated changes long before it expired. Because of this, he advises clients who are passing on between $ 5 million and $ 11.7 million in inheritance to expedite their talent for children.
If the Democrats lowered the exemption to $ 3 or $ 3.5 million, that urgency would fall on a less affluent group of customers. However, Grinspoon says he’s waiting for more clarity before making any further changes.
“In terms of corporate tax allocation, I still see stocks as the best house in a bad neighborhood compared to fixed income and other options,” he says.
Lori Van Dusen from LVM Advisors, photographed for Forbes in August 2018.
Franco Vogt / The Forbes Collection
Lori Van Dusen, CEO, LVW consultant
Pittsford, New York
Assets Under Management: $ 1.8 billion
Van Dusen doesn’t think it is “a smart idea” to launch a $ 1.9 trillion stimulus package and raise taxes in the same year, but believes it is a strong possibility and fears it will negatively affect the US economy Markets could affect.
“There are many positive aspects [in the market] in terms of liquidity, economic outlook, accommodative fiscal monetary policy and low inflation, ”she says. “This tax legislation, depending on what it looks like, could be tough for the market.”
Van Dusen was busy planning the sunset of the “fairly generous” estate tax rate before the recent tax hike talk, and is now preparing for any potential negative impact on the markets.
“Our advice was to be prepared for more volatility,” she says. “We have already planned as much as we can and have expressly advised customers to give away more quickly and to use the current inheritance tax law.”
“What we are telling people is that if you make more than $ 400,000 a year, you will see a tax increase, and if you make more than $ 1 million a year, capital gains will go up,” she says .
Jeffrey Fratarcangeli Managing Director, Fratarcangeli Wealth Management
Fratarcangeli wealth management
Jeffrey Fratarcangeli, Managing Director, Fratarcangeli Wealth Management
Birmingham, Michigan
Assets Under Management: $ 1.8 billion
Fratarcangeli says he was relieved that there was no “fire drill” in December before the 2021 tax changes and expects there won’t be a tax hike by 2022. Fratarcangeli, whose company of the same name is part of the Wells Fargo Advisors Financial Network, sees corporate tax increases as a disadvantage for global companies and has shifted to small and medium-sized companies in anticipation.
A post-pandemic tax hike has made estate planning discussions easier and more noticeable due to a renewed awareness of mortality and a proactive response to tax changes, according to Fratarcangeli.
After a decade of strong market returns and an upward trend in the last six to eight months after the March collapse, Fratarcangeli says the early discussions about tax planning are a necessary reminder for many clients as to why they need professional financial advice.
Jason Katz Managing Director, UBS Wealth Management
UBS
Jason Katz, Managing Director, UBS Wealth Management
New York, NY
Assets Under Management: $ 3 billion
“The introduction of Covd vaccines made everyone happy and distracted, but over the past 24 hours I’ve seen the volume of emails and calls increase regarding this issue,” he says. “My view during the campaign, which is largely my view now, is that if you have half of last year’s GDP from monetary and fiscal stimulus and deficits in excess of a trillion dollars, you have to pay it in some way, shape, or shape. “
In view of all these changes, it is important, according to Katz, that the “tax tail does not wag the investment dog”.
“The preventative planning that we did on the sidelines focuses on some of the higher income and higher revenue investments within deferred tax accounts and encourages clients to make more tactical changes to be more long-term oriented in order to reduce the tax friction in the process Trade often, ”he says, adding that he is bullish on municipal bonds because of the proposed tax changes.
“I don’t think many customers are happy about this conversation, but I can’t imagine that many of them are very surprised,” adds Katz. “When you have a well-designed long-term financial plan and appropriately allocate assets in certain types of accounts, you’re investing for investment cycles versus election cycles.”