Page 25 - Investment Advisor July/August 2021

among their ranks, said Townsend. Secure Act 2.0, that include the RMD meantime there’s the potential for more
There is also uncertainty about age increase, but the bill has yet to be market volatility.
whether Democrats could use the rec- voted on by the full House or the Senate. Markets also will be watching for
onciliation process twice — for the jobs What Congress can’t delay that long regulatory changes by the Securities
plan and the families plan, according to is the approaching debt ceiling, which and Exchange Commission.Townsend
Townsend. “There is defi- expects the SEC will con-
nitely one more opportu- Biden wants to finance the plan with tinue to pursue scrutiny of
nity they can use,” he said, an increase in the corporate income meme stocks, which the
adding that Democrats will commission reasserted
have to figure out what tax; Republicans want to redirect Monday as the price of AMC
would be in that one bill. shares continued to soar, and
unused coronavirus relief funds of special-purpose acquisi-
BIPARTISAN for state and local governments tion companies (SPACs).
AGREEMENTS Townsend also expects
Townsend sees bipartisan plus user fees paid by individual the agency to continue to
agreement on legislation taxpayers, the latter violating hold off on approving a
to raise the age at which Bitcoin ETF. (A decision on
required minimum dis- Biden’s pledge to not raise taxes on the VanEck Bitcoin Trust
tributions from tax-free was due on June 17, but
retirement accounts begin those earning $400,000 or less. the agency could decide to
from 72 currently to 75 and postpone it again.)
to increase catch-up contributions for the U.S. is expected to reach Aug. 1. On the regulation front, he antici-
those nearing retirement, though both The Treasury can take “extraordinary pates new SEC rules on corporate dis-
could be delayed until late fall or 2022. measures” to avoid a default, which closure of climate change risk and its
The House Ways & Means Committee could push the deadline back to “prob- impacts, which the agency has already
already has passed a bill, dubbed the ably September or October,” but in the announced it is pursuing.

How Advisors Can Help Clients some or all of a potential tax hit on
inherited assets. They may want to
Avoid Capital Gains Taxes reconfigure some things in light of this
potential change.
• Consider donating appreciated
here are a number of ways that • Sell appreciated assets before the assets to charity. Donating appreciated
Tadvisors can help their clients avoid new capital gains tax rates go into effect stock offers not only a charitable tax
a capital gains tax hit. These strategies if this strategy would be beneficial in deduction based on the market value
are not new, but many will likely become light of your client’s overall situation. of the shares, but also avoids the pay-
more prominent should the Biden pro- • Consider converting assets to a Roth ment of any capital gains taxes. Beyond
posal pass. A few examples include: account. This can make a great deal of a direct donation of assets, a donor-
• Focus on asset location. Where pos- sense due to the current low overall advised fund might be an alternative for
sible, hold assets that will be subject to income tax rates and may prove to be a clients to consider.
significant capital gains in retirement good way to avoid some of the potential • Use tax-loss harvesting to offset any
accounts. This could mean holding capital gains tax hit your clients could potential capital gains when rebalancing
Samuel Corum/Bloomberg employer-sponsored retirement plans. planning perspective. what the final capital gains piece of the
client portfolios.
face if these new rules are enacted. It
growth stocks in traditional or Roth
While nobody can accurately predict
can also be beneficial from an estate
IRAs, as well as in a 401(k) or other
• Wealthy clients should review their
tax and spending package will look like,
This could also include self-directed
retirement accounts for alternative
estate plans in light of the potential
we think it’s fair to say there will be a lot
of negotiation on the final version of any
changes to the step-up in basis rules
assets such as real estate, cryptocur-
rency and a host of others.
to look at ways their heirs could avoid
changes to the capital gains tax rate.
JULY/AUGUST 2021 INVESTMENT ADVISOR 23