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April 30, 2021 at 09:56 AM
What You Need to Know
- The Biden administration has described the proposed changes only in vague terms.
- One phrase implies an estate valuation change could help charitable planners.
- Michael Finke says the changes could make life and annuity issuers more valuable.
The Biden administration has given only general descriptions of the mechanisms it might use to pay for new American Families Plan programs, such as free community college tuition.
Some personal finance specialists who have read the administration’s proposal fact sheet say the revenue-raising provisions that are included could be great for life insurers.
Michael Finke, professor of wealth management at the American College of Financial Services, tweeted about the possibilities Thursday.
Reading through the new tax law thinking about the insurance company execs who decided to spin off their life and/or annuity business over the last couple years because of low interest rates…
— Michael Finke (@FinkeonFinance) April 29, 2021
Finke predicted the proposed increase in the top capital gains tax rate — to 39.6%, from 21%, for households making more than $1 million — and a proposed requirement that taxpayers include growth in an asset’s value when they inherit the asset, would lead to more use of life insurance and annuities to soften the impact.
The relative advantage of holding non-qualified assets taxed at long-term capital gains rates within insurance wrappers for high-income investors is going to rise dramatically.
— Michael Finke (@FinkeonFinance) April 29, 2021
Administration officials say they plan to design the new tax rules to protect family-owned farms and family-owned businesses.
