POST-ELECTION ESTATE PLANNING: WHAT TO EXPECT IN TRUMP’S AMERICA

By Cory Howes

coryLate next month, Donald Trump will become the 45th President of the United States. Earlier in January, the Senate and House of Representatives will convene with Republican majorities. How you update and manage your estate plan and financial plan under the Republican- controlled Congress and Presidency can make a significant difference in your tax burdens and the way your wealth continues to accumulate.

Let’s take a brief look at how some of the preliminary details of President-elect Trump’s proposals could affect your estate.

Donald Trump’s proposals

Donald Trump has proposed across-the-board reforms in the tax codes, and while he promises to close some loopholes, the general trajectory of his proposals is toward lowering taxes overall. Here are some of the most pertinent points of his announced plans:

  • Lowering income tax rates across the board, including significant raises to the standard deductions
  • Reducing the number of individual income tax brackets from seven to three, with a maximum tax rate of 33 percent (down from 39.6 percenttoday)
  • Reducing the business tax rate from 35 percent to 15 percent
  • Eliminating the estate tax

Remember that any change to tax laws requires congressional approval and won’t happen automatically. In spite of Republicans being in control of the executive branch and Congress, there will still be negotiation and compromise reflected in the final versions of bills sent for the president’s signature. Let’s also remember that the rules are only “final” until the government decides to change them again.

Recommendations, assuming President-elect Trump’s agenda is enacted:

  • Be cautiously optimistic. The elimination of the estate tax in particular is likely to be welcome news if you have higher net worth (or even if you are on your way there), but this proposal may be subject to opposition or compromise in Congress. This compromise could range from a “sunset” provision to gradual phase-in or something else entirely. Many people do not realize that the last time we had no estate tax, in 2010, the law also eliminated the step-up in basis upon death (resulting in far more assets being subject to capital gains taxes). So don’t assume that the “death tax” is automatically gone on day one of the Trump administration, or that there won’t be compromises that result in other forms of taxation at death.
  • It’s more than taxes. Although taxes have long had top billing in many conversations about estate planning, the real reasons for estate planning are present, no matter who is in the White House and Congress. This includes planning for medical or financial decisions during incapacity, directing your financial legacy to your intended beneficiaries, asset protection, and more. No matter how hard Congress may try, they can’t seem to legislate away lawsuits, wasteful spending by young beneficiaries, and other issues that you and your advisors can overcome through proper planning.
  • Stay tuned for updates. As tax and regulatory reform starts being fleshed out in Washington and ultimately enacted, your advisors, including those of us you rely on at the Forrest Firm, will provide recommendations to you.

Preparing your estate for the next administration

With all the volatility surrounding this now-concluded election cycle, the only thing of which we can be certain is change. Regardless of whom you supported, any election requires you to take some action to protect your interests. Being proactive is the best way to protect your wealth against any changes to come.

Our staff and I would like to extend our very best wishes to all of you for a family-filled holiday season. As we enter the new year, please don’t hesitate to contact me with any of your estate planning questions.