THE TRANSATLANTIC MAGAZINE
THE TRANSATLANTIC MAGAZINE
A delay to the final outcome of the US Election is "the worst possible outcome for overseas Americans", warns John Bull, a partner at US tax firm Blick Rothenberg, who says that "in the event of a Biden victory", Americans living overseas will "have little time to plan their Estate and Gift tax affairs before 31 December 2020."
Elaborating, Mr Bull explains that "The threat to a reduction of the Estate & Gift Tax exemption has been a focus for many high net worth ‘overseas Americans’ and they have been looking at possible planning opportunities with advisors pending the result of the election." Mr Bull adds that "If challenger Joe Biden is eventually declared the winner, the generous gift and estate tax exemption of $11.58m could be in danger of being significantly scaled back in 2021 and it is likely that such changes could be made effective from 1 January 2021."
Delays over the election would leave overseas Americans with a lot less time before payments are due, with Mr Bull indicating that "The risk of a significant delay or even a Supreme Court challenge to the US Presidential results places extreme time pressure on the execution of any gift and estate tax planning before the end of 2020, as this often requires the complex legal drafting that is associated with the settlement of trusts."
In his statement, Mr Bull also looks at how the composition of Congress could also affect tax regulations. The current state of play in Congress, with the Senate controlled by the Republicans and the House controlled by the Democrats, has meant limited changes in tax policy in the latter stages of the current Trump Presidency.
If, as is possible, the status quo in Congress continues, Mr Bull says that "A similar stalemate would apply in the event of a Biden Administration, with the Republican Senate blocking Democrat proposals". However, Mr Bull adds that "there might be some scope for compromise, whoever wins the Presidential election. If re-elected, President Trump would be in his second term and no longer having to act with an eye focussed on a re-election campaign. Unless the costs associated with COVID-19 are to be exclusively funded by ever increased borrowing, some taxes will have to rise during the second Trump term. There could be extensive bargaining on which aspects of Democrat tax policy might be acceptable to both the Republican Senate and President Trump under a label of ‘beating the virus’."
On the other hand, if Joe Biden wins, Bull suggests that "the Republican Senate might also be up for a ‘beating the virus’ compromise on increased taxes. That might involve some of what the Democrats suggested in broad outline during the campaign".
For more insights from Blick Rothenberg, go to www.blickrothenberg.com/insights/topics.
