As we welcome President-Elect Trump into our lives as a key policy maker for the next four years I feel it wise to write about how his election may impact Estate Planning laws, rules and strategies. While it is too early to know what changes (if any) will actually be made, there are some things worth monitoring.
Start first with the fact that many people believe that the whole concept of Estate Tax is actually in jeopardy. There are a few possibilities about how the Estate Tax laws may be changed. Here are some options. As you may remember from previous blog posts, the Federal Estate and Gift Tax, while two separate things, are very much intertwined when determining total tax liability at guest.
- Immediately permanent repeal of the gift, estate, and generation-skipping transfer (GST) tax.
- Permanent repeal of all transfer taxes to take effect over some phase-out period, for example ten years similar to what occurred in 2001. This would also present the risk that the tax may be changed again during such phase out period as happened in the past.
- Repeal of the estate tax but retention of the gift tax as a backstop to the income tax.
- Repeal of the estate tax (with or without a repeal of the gift tax) and carryover basis.
- Repeal of the estate tax (with or without a repeal of the gift tax) and a capital gains tax on death – a capital gains tax on death, for instance. Or maybe a President Trump would treat inheritances as ordinary income.
Another wrinkle in this whole situation is that if there ARE any changes or repeals to the Estate Tax, nobody knows when they would actually be deemed effective. Could it be January 2018? Could it be made retroactive to January 2017 after Trump takes office? Only time will tell.