Trust and Estate Taxes

 Trust and Estate taxes were introduced to reduce dynastic wealth, the handing down of extreme wealth from one generation to the next. Tax loopholes have turned estate taxes into what many call a “voluntary” tax because the tax is so easy to avoid.

There are a myriad of ways in which those with extreme wealth can maintain their dynasties, but one of the most egregious is the loophole that allows unrealized capital gains, e.g. stocks that have gone up in value but have not been sold, to pass down to heirs without ever paying the capital gains tax on those gains. This is referred to as the stepped-up basis loophole.

While much attention is given to lowering the threshold for taxing estates, or for increasing the rate of tax, there are many more important tax policy reforms that have been suggested or introduced in Congress that address the trust and estate tax loopholes.