Skip to Main Content

Beth Kaufman Comments on Estate Planning Under New Biden Administration

January 14, 2021, Tax Notes

One of President-elect Joe Biden’s most significant proposals to tax the estates of wealthy individuals doesn’t actually involve the estate tax — yet.

Biden has often said that he supports repealing stepped-up basis at death, but that’s not quite what he’s proposing to do, according to Beth Shapiro Kaufman of Caplin & Drysdale. Instead, he is calling for treating death, as well as gifts, as capital gains realization events, she said.

Under Biden’s proposal, the unrealized gains of a decedent would be taxed on a decedent’s final return, and the unrealized gain on a gift would be taxable to the donor, Kaufman explained. “So you still end up with a stepped-up basis; you’ll just have to pay the tax to earn that stepped-up basis,” she said January 13 at a District of Columbia Bar virtual tax conference.

“This would be a huge change. It’s basically imposing something that’s like the Canadian system, but when Canada did this, they got rid of their estate tax and substituted capital gains at death,” Kaufman said.

Biden and Congress agreeing to a similar arrangement may not be “terribly likely to occur” this year, as it would probably require years of discussion, Kaufman said. But it wouldn’t necessarily be a non-starter with Republicans, she continued, noting that President Trump, during his 2016 campaign, similarly proposed pairing elimination of the estate tax with deemed realization at death.

“There may be some room for negotiation, some kind of middle ground here, that would end up getting rid of the free step-up at death,” Kaufman said.

Biden’s proposal differs from most proposals on stepped-up basis, which include a carryover basis system, like the December 2019 joint proposal from Sen. Mitt Romney, R-Utah, and Senate Finance Committee member Michael F. Bennet, D-Colo. Biden's plan would likely involve exceptions, such as those for gifts to charity or to a spouse, and for various asset classes and exclusions for taxpayers below a designated threshold, according to Kaufman.

The size of that threshold remains to be seen. Kaufman said that while Biden has pledged not to raise taxes on taxpayers with incomes of less than $400,000, setting the threshold at that level would be far too low. “We’re going from a situation where there’s no estate tax on people earning $11 million or less, [and] now all of a sudden we’re going to impose capital gains tax on people down as low as $400,000? That seems a little unlikely to me,” she said.

Kaufman said Canada’s system has been in place for several decades, which suggests it has been “sufficiently successful.” However, the change wasn’t sufficient to tamp down planning to avoid the tax, Kaufman said, adding that there are lessons U.S. policymakers could learn from Canada’s experience if they pursue a similar path.

. . .

Kaufman agreed, saying that if Biden’s proposal becomes riddled with exceptions, those exceptions would drive taxpayer behavior and make the system less effective.

“If you carve out an exception for family farms, all of my clients will buy family farms,” Kaufman said.

For the full article, please visit Tax Notes’ website (subscription required).


About Caplin & Drysdale
Celebrating our 55th Anniversary in 2019, Caplin & Drysdale continues to be a leading provider of legal services to corporations, individuals, and nonprofits throughout the United States and around the world. We are also privileged to serve as legal advisors to accounting firms, financial institutions, law firms, and other professional services organizations.

The firm's reputation over the years has earned us the trust and respect of clients, industry peers, and government agencies. Moreover, clients rely on our broad knowledge of the law and our keen insights into their business concerns and personal interests. Our lawyers' strong tactical and problem-solving skills -- combined with substantial experience handling a variety of complex, high stakes, matters in a boutique environment -- make us one the nation's most distinctive law firms.

With offices in New York City and Washington, D.C., Caplin & Drysdale's core practice areas include:
For more information, please visit us at
Washington, DC Office:
One Thomas Circle NW
Suite 1100
Washington, DC 20005
New York, NY Office:
600 Lexington Avenue
21st Floor
New York, NY 10022


This communication does not provide legal advice, nor does it create an attorney-client relationship with you or any other reader. If you require legal guidance in any specific situation, you should engage a qualified lawyer for that purpose. Prior results do not guarantee a similar outcome.

Attorney Advertising
It is possible that under the laws, rules, or regulations of certain jurisdictions, this may be construed as an advertisement or solicitation.
©2021 Caplin & Drysdale, Chartered
All Rights Reserved.

Related Professionals

Related Practice Area(s)