Mitigate potential tax changes with strategies from Valley Wealth & Trust

By Evan Bliss & Christopher Kavanagh • Valley Bank

Library | 7/2/2021


The Biden Budget: Tax Policy Overview

President Biden released his budget proposal to Congress in late May which includes plans to increase tax revenues by more than $3 trillion over 10 years. The added revenues are intended to fund the American Jobs Plan and American Families Plan which prioritize initiatives on infrastructure, clean energy, and social programs. The proposed tax changes impact both businesses and households.


For businesses, there are several notable items that include:

  • Raising the statutory tax rate to 28%, which would essentially unwind half of the benefit from the tax reform passed under the past administration.

  • Applying a minimum tax on book income that would establish a 15% floor on corporate book income reported to investors.

  • Reducing incentives for real estate by limiting the ability to use “like-kind exchanges” to defer tax liabilities.


For individuals, the headline proposals include:

  • Restoring the top marginal rate for taxpayers with more than $400 thousand in income back to 39.6% from 37%.

  • Increasing the capital gains rate to 43.4% compared to 23.8% for taxpayers with incomes above $1 million.

  • Other personal tax changes, including minimizing certain exemptions and limitations.


Strategies from Valley Wealth & Trust to Mitigate Certain Tax Proposals

Proposed changes to estate taxes make the implementation of planning especially critical for many wealthy individuals. The current federal estate tax lifetime exemption is $11.6M.  Senator Bernie Sanders introduced a proposal that would reduce that exemption to $3.5M and increase estate tax rates. Clients who are looking to pass as much wealth as possible to their children and grandchildren should consider implementing strategies prior to year-end. 
The current exemption amount can be protected from the expected change, grandfathered, by establishing an irrevocable trust in 2021. Charitable lead trusts, which are also irrevocable, allow clients to address their charitable giving interests and take advantage of deductions during lifetime, while providing for their heirs at the end of the term of the trust. 
It is also expected that limitations will be placed on Grantor Retained Annuity Trusts (GRATs).  In this strategy the grantor creates an irrevocable trust for the benefit of her heirs, funds the trust with an appreciating asset and receives an annuity equal to the value of the initial gift. At the end of the term of the trust, the remainder, which is all appreciation, passes to heirs without impacting the grantor’s lifetime exemption.
For a century, real estate investors have utilized the 1031 Exchange to avoid incurring capital gains on the sale of investment property. The Biden administration’s proposal would replace the 1031 Exchange with a one-year deferral of gains which would be limited to $500,000 for an individual and $1,000,000 for a married couple. In this strategy, as an alternative to purchasing a like-kind property, the exchanger can simply invest the proceeds in a Delaware Statutory Trust (DST), which is very similar to a real estate investment trust. Valley serves as a Qualified Intermediary for the 1031 Exchange and can serve as Co-Trustee for trust owned exchanges when the Trustees plan to utilize a DST. 
As a corporate fiduciary, Valley can assist clients in implementing plans to pass wealth to their children and grandchildren both during their lifetimes and after death. Our level of continuity and professionalism stems from over ninety years of experience in the business. And while many banks have raised the threshold to access their private banks, Valley continues to work with clients with as little as $500 thousand of investable assets.
To learn more about these tax strategies and other offerings from Valley Wealth & Trust, contact your bank representative or complete the form below


Valley Wealth & Trust provides fiduciary, custodial and escrow services for clients throughout the Bank’s footprint. Our Trust team is uniquely qualified to fulfill our clients’ asset transfer and philanthropic goals, by serving as: Sole Trustee or Co-Trustee; Executor or Co-Executor; Agent for Fiduciary; Custodian; or Escrow Agent. Minimum account size is $500,000.


Valley Bank is the corporate brand of Valley National Bank. The information in this report was prepared by Valley Bank. The information herein is believed to be reliable and has been obtained from public sources believed to be reliable. Valley Bank makes no representation or warranty as to the accuracy or completeness of such information. Opinions, estimates, and projections in this report constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinions of Valley Bank and are subject to change without notice. Valley Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof in the event that any opinion, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Prices and availability of financial instruments are subject to change without notice. This report is provided for informational purposes only. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. The products offered by Valley Bank’s Trust Department are not FDIC insured, are not deposits or other obligations of Valley Bank, are not guaranteed by Valley Bank and involve investment risks, including possible loss of principal amount invested. Valley Bank does not provide legal or tax advice. Each client Should always consult with his/her personal tax and/or legal advisor for information concerning his/her individual situation and to learn about any potential tax or other implications that may result from acting on a particular recommendation.




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