Risks And Opportunities for Clients in the Age of Trump

A new presidential administration can bring sweeping changes to the tax codes, new rules for how wealth is taxed, and a litany of other legal and regulatory changes. Now that Donald Trump has taken office and has a Republican-controlled Congress, many in the estate planning industry expect to see significant changes during the next year.

Your clients may be feeling a bit of anxiety right now about their financial future, and they are depending on you, their trusted advisor, to be on top of any upcoming changes so they can minimize risk and exploit opportunities. We, too, are watching carefully, and in the weeks and months ahead, we’ll be sharing the latest updates and information you need to help your clients make informed decisions about their estate plans.

In the meantime, taking a proactive approach with your clients in light of the election (including a review of their current tax, financial, and estate plans) will go a long way toward building trust and setting your clients at ease.

Here’s a quick overview of what to expect in the Trump era, based on what we know thus far:

  • The Trump administration wants to lower taxes, including a possible repeal of the estate tax.
  • Congressional Republicans have their own agendas regarding taxes, which will probably cause some give-and-take as the final proposals take shape.

Let’s take a closer look at each of these factors.

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 the core components of his plan:

  • Lowering income tax rates across the board, including significant raises to the standard deductions
  • Reducing the number of individual income tax brackets from 7 to 3, with a maximum tax rate of 33 percent (down from 39.6% today)
  • Reducing the business tax rate from 35 percent to 15 percent
  • Eliminating the estate tax
  • Remember that any change to the tax laws requires congressional approval and won’t happen automatically. Even with full Republican control of government, there will still be negotiation and compromise reflected in the final versions of bills that arrive on President Trump’s desk.

Recommendations, assuming President Trump’s agenda is enacted:

  • Estate and Capital Gains Tax Changes. The elimination of the estate tax, in particular, is likely to be welcome news to your higher net worth clients, but the 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. If the estate tax is repealed, it is possible that loss of revenue will be offset by eliminating the step-up in basis upon death.
  • “Stretch” IRAs. Another hot topic is the potential for many (most) beneficiaries losing the ability to “stretch” the required minimum distributions from inherited IRAs. We will continue to monitor the status of bills relating to Stretch IRAs and keep you informed of significant developments.
  • Stress the continued need for smart estate planning. Although taxes have long had top billing in communications about estate planning, the real reasons for 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.
  • Stay tuned for updates. As tax reform starts being fleshed out in Washington and ultimately enacted, we will provide recommendations on how to advise your clients.
What to do in the meantime

As we begin the new year, there’s one big thing to focus on to provide the best service to your clients – begin scheduling reviews now.

Now that President-elect Trump has become President Trump, your clients should avail themselves of your services to determine how to make the most of existing rules before they are (likely) changed, and how to adapt to any changes once they occur. Again, the best way to calm anxiety in your clients is by taking a proactive stance. Reach out now to recommend a review of your clients’ current financial and estate plan during the first quarter of the year.

No one knows exactly what the future holds, but it’s fair to say that significant changes to income taxes, estate taxes, and the overall regulatory environment are coming. Change is really the only certainty. The good news is that change doesn’t have to be a negative. By being proactive and adapting, you can continue to help your clients build their wealth while growing your own business. As noted author and leadership expert John C. Maxwell reminds us: “Change is inevitable. Growth is optional.” As a trusted financial advisor, you have the ability to lead your clients toward financial growth, even during the uncertainty that naturally comes with the change of government.

We are here to help

As for your own support system, know that we are staying current with the latest developments of the new Congress and President. As new tax policies are proposed and eventually implemented, we will keep you updated with the latest information and strategies to help you provide your clients with useful estate planning insights. If you have any questions or concerns in the meantime, don’t hesitate to contact me. We are here for you and your clients.