The tax proposals endorsed by President Joe Biden includes 1. reducing the exemption for purposes of the federal estate tax; 2. increasing the tax rate on estates; 3. increasing the capital gains tax rate on realized capital gains; and 4. eliminating the step up in basis adjustment at death.

When campaigning, the president wanted to lower the estate tax exemption from $11.7 million per person to $3.5 million person. Also, it was proposed that the tax rate would increase from 40% to 45% on the amount above the exemption.

Many things are a bit uncertain right now, but this does not mean people should do nothing about their financial and estate planning affairs. Having your foundational legal papers updated and in place is critical for avoiding many problems.

Of course, you should have updated powers of attorney for health and finances. You should consider whether the powers will be effective only if one or two doctors confirm your incapacity or immediately effective.

You should almost definitely use a revocable trust to instruct loved ones what to do when you become disabled or pass away. If done properly, everything is done privately and costs and administration fees are substantially reduced. Family conflict is avoided.

Most people want their children to inherit “in trust” so the assets will be protected from predatory spouses, creditors, will stay in your family and will not be exposed to probate (a public process) and the federal estate tax (which can be very costly for those exposed). 

Inheriting property “in trust” can be a great way to make sure your child has control and benefit but that the remainder will stay in the family and it will not be subject to unnecessary taxes. It is what smart people do.

Nowhere is the saying “An ounce of prevention is worth a pound of cure” more relevant than in the area of estate planning. If done properly so you understand why and how it is beneficial for you, then you will achieve a peace of mind that will be good for your health.

Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate and elder law planning attorney.