What Does a Trump Presidency Mean for Client's Estate Planning?

Jackie Bedard
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The votes are in. Donald Trump is the President Elect. 

WealthManagement.com has published a great analysis piece on what the future of estate planning could look like under a Trump administration, and we believe the highlights are worthy of your attention.

When Trump campaigned, he proposed the following tax reforms:

•    Eliminating the federal estate tax
•    Reducing marginal income tax rates for individuals and businesses, 
•    Increasing standard deduction amounts, 
•    Repealing personal exemptions, 
•    Capping itemized deductions, 
•    Repealing the individual and corporate alternative minimum taxes (AMT), and 
•    Repealing the 3.8 percent net investment income tax (NIIT). 

To accomplish all that, Trump needs a Republican-controlled Congress to overhaul tax legislation early in 2017. By the looks of the House and Senate election results nationwide, he may accomplish many of his proposals easily.

Fewer Taxes Likely 

We expect more than a few phone calls and emails from clients wondering what a repeal of the federal gift tax, estate tax, and generation-skipping transfer taxes means for their wealth and asset planning.

Trump proposed establishing in their place a carryover basis for appreciated property, subjecting beneficiaries to income tax on the gains when they sell or transfer the property in the future, with an exemption amount of $5 million of gains per decedent ($10 million per married couple).

Trump's proposed tax changes were estimated to reduce federal tax revenue by $6.2 trillion over the next ten years, and increase the federal debt by about $7.2 trillion over the same period if not offset by spending cuts.

Nearly all taxpayers could see their federal taxes decrease in 2017 if his proposal becomes law, reported WealthManagement.com. Households earning between $143,100 and $292,100 could see a tax decrease averaging around $4,310. Those earning over $3.8 million - the top 0.1 percent - could see an average $1.07 million decrease in federal taxes next year.

The Other Republican Plan

Keep in mind that GOP leaders in Congress also pitched their own tax reform proposals earlier this summer. And while their ideas share similarities to Trump's plan, his cuts were more sweeping. 

Some Republican officeholders might not be willing to eliminate as much tax revenue as Trump. Their plan is expected to reduce federal tax revenue by $3.1 trillion over ten years, and only increase the debt by $3 trillion if not offset by spending cuts, according to WealthManagement.com.

Republicans in the U.S. House of Representatives have pitched lowering taxes across the board for individuals and repealing the NIIT, gift, estate, and generation-skipping transfer taxes. 

They've also proposed creating three brackets of rates of 12 percent, 25 percent, and 33 percent, replacing current capital gains tax rates with a 50 percent income tax deduction for net capital gains, dividends, and interest income. 

Additional details about Trump's and the GOP's tax reform plans can be read in the article. 

Planning Remains Vital

What we want to emphasize that while you may be confused about what's next for you in your planning, we are here for guidance. You may be confused enough to think that a formal estate plan is no longer necessary. Remember that proper planning encompasses far more than tax avoidance strategies.

If you have any questions about what tax reform looks like next year and how it may affect you, please contact our office. We're happy to meet with you.

If you have a specific case or a question, please don't hesitate to call our office at 919-443-3035 or use our contact form.

 
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