The United States is expected to tighten its tax rules on wealth transfers if Vice President Kamala Harris wins the 2024 presidential election. Proposals being discussed would lower the estate‑tax exemption, eliminate the “step‑up basis” for inherited assets, and could pave the way for an annual wealth tax. The changes could take effect as early as mid‑2025, giving high‑net‑worth individuals a limited window to adjust their estate and tax strategies.
What the proposals would change
| Current rule | Proposed change |
|---|---|
| Estate‑tax exemption: $13.6 million per individual (≈ $27 million per couple) | Reduce exemption to $3.5 million per individual (≈ $7 million per couple) |
| Step‑up basis for inherited property (capital gains are reset to market value at death) | Abolish the step‑up, meaning heirs would owe capital‑gains tax on the original purchase price |
| Capital‑gains rate on inherited assets | Remain at the existing rate (the proposal notes the rate is unchanged from the 1986 law) |
| Potential wealth‑tax legislation | Discussed as an annual levy on net worth, similar to ideas promoted by Senator Elizabeth Warren |
Impact example – A property purchased in the 1960s and inherited today with a fair‑market value of $20 million could see the tax bill rise from roughly $3.5 million under current rules to about $13.2 million in estate tax (55 % rate) plus an additional $4.2 million in capital‑gains tax, totaling $17.4 million.
Why the changes matter now
- Wealthy Americans have already begun gifting assets to children to stay below the current exemption level.
- The proposals are modeled on measures introduced during the Biden administration but not yet enacted.
- If enacted, the rules would apply to all U.S. citizens worldwide, as the United States taxes its citizens regardless of residence.
Practical steps to consider
-
Review and update estate plans
- Accelerate gifting strategies while staying within annual gift‑tax exclusions.
- Evaluate the use of irrevocable trusts to lock in current exemption levels.
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Assess the “step‑up basis” risk
- For assets with large unrealized gains, consider partial sales now to crystallize gains at current tax rates.
- Keep detailed records of acquisition dates and costs to simplify future capital‑gains calculations.
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Explore dual citizenship or residency options
- Citizenship‑by‑investment programs (e.g., Caribbean, Turkey, Malta) typically require a financial commitment of $250 k–$1 M and take 4–12 months to process.
- Dual citizenship does not exempt U.S. citizens from tax, but it can provide greater flexibility for travel, residency, and potential future renunciation.
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Consider relocation to low‑tax jurisdictions
- U.S. territories such as Puerto Rico offer significant tax incentives for qualifying residents (e.g., Act 60/Formerly Act 20/22).
- Moving abroad may reduce exposure to future U.S. estate‑tax changes, but U.S. citizens remain subject to worldwide income tax unless they renounce citizenship.
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Plan for possible wealth‑tax legislation
- Estimate the net‑worth threshold at which a wealth tax would apply (proposals have ranged from $10 million to $50 million).
- Model cash‑flow impacts under various tax‑rate scenarios to determine whether asset reallocation or charitable giving could mitigate liability.
Timing and risk management
- Early action is crucial. Waiting until a law is passed could limit the ability to use current exemptions or to complete citizenship‑by‑investment applications before stricter vetting processes are introduced.
- Legislative uncertainty: The proposals could be altered, delayed, or repealed depending on congressional negotiations and the election outcome.
- Currency and inflation effects: Even if nominal tax rates rise, inflation may erode the real value of thresholds over time; however, the proposed cuts to exemptions are large enough to outweigh modest inflation adjustments.
Decision criteria
| Factor | When to prioritize |
|---|---|
| Size of estate (>$10 M) | Strongly consider gifting, trusts, and dual‑citizenship options now |
| High‑growth assets (significant unrealized gains) | Evaluate partial sales or restructuring to lock in gains before step‑up basis removal |
| Desire for mobility | Pursue citizenship‑by‑investment or residency programs to broaden relocation options |
| Willingness to renounce U.S. citizenship | Only if the tax burden outweighs the benefits of U.S. citizenship and you have a viable alternative nationality |
Bottom line
If the Harris administration implements the proposed estate‑tax and step‑up basis changes, high‑net‑worth Americans could face dramatically higher taxes on inherited wealth. Proactive estate planning, strategic gifting, and exploring dual‑citizenship or relocation options can provide flexibility and mitigate potential liabilities. Because the legislative timeline is uncertain but could be as soon as mid‑2025, acting now rather than waiting for final enactment is the safest approach.
