A QUICK GUIDE TO TRUMP’S POTENTIAL IMPACT ON YOUR ESTATE PLAN
February 10, 2017
By Cory Howes
Since your estate planning strategies must align with tax policy, the ushering in of a new government, controlled by one party with a new agenda, could have a profound effect on your future plans. While the new administration is still young, it’s helpful to think about ways that a Trump presidency, combined with a Republican-controlled Congress, could affect your planning.
President Trump’s tax plan
Whenever the presidency shifts parties, it usually means major shakeups in fiscal and tax policy. Trump’s tax plan is no exception. The plan contains a grocery list of proposed changes that we could see Congress enact during his time in office:
- The repeal of the estate tax
- Lower income tax rates
- The introduction of a tax deduction for childcare costs
- Dependent care savings accounts (DCSAs) with conditional matching
- The switch from seven to three tax brackets
- Increased standard joint deduction from $12,600 to $30,000
- Increased itemized deductions cap from $100,000 to $200,000
- Decrease in business tax from 35 percent to 15 percent
Of these proposed changes, the repeal of the estate tax, also known as the “death tax,” means your assets would not be subject to an estate tax by the federal government upon your death. It is also predicted that the gift and generation-skipping taxes may be repealed as well. For high net worth clients, these actions could enable you to keep wealth within your family, but we will have to wait until we see the final legislation to know the exact mechanics. On the other hand, the proposed changes could also negatively impact taxation on charitable gifts and other philanthropic measures contained in your estate plan. There is also some concern among estate planning professionals that the repeal of the estate tax will be combined with the loss of the step-up in basis upon death (resulting in more assets being subject to capital gains tax). If that happens, it could affect significantly more people than just those who are now subject to the estate tax.
Finally, keep in mind that some states still have their own estate tax or inheritance tax which will not necessarily be affected by federal policy. Estate taxes differ from state to state, so your wisest move is to review your plan with an experienced estate planning attorney to discover how these changes may impact its other components. That being said, proposed policy changes must go through Congress, which has its own agendas and ideas about fiscal and tax policy. So, staying on top of new developments and in close contact with your team means you’ll be prepared for whatever unfolds over the coming years.
Over the next four years, we will be assisting our clients at the Forrest Firm, navigating changes to tax policy for individuals, families, and their businesses, crafting strategies that preserve wealth and ensure that their wishes are fully met upon disability and death. Contact me today if you have questions regarding your estate plan.