President Trump and Your Estate Plan

As an estate planner, I get asked questions about the future all the time. One question I’ve been asked by a few previous clients is “What will President Trump do to my estate plan?”

Estate planning is all about the future. Unfortunately, I don’t have a crystal ball. I can just put together documents to deal with a variety of foreseeable futures. Complicating this future is a lack of details from President Trump about changes he would like to happen.

What Could Change

Right now, we know that he wants to eliminate the federal estate tax. Sounds like a large change but keep in mind that only .02% of all estates in the country were subject to federal estate tax in 2015. So most estates will be unaffected.

However, one huge unknown that has estate planners concerned is his plan to replace the estate tax with a capital gains tax at death. The general outline he has presented would remove the step-up in basis for estates over $10,000,000. If he does not step carefully, he could remove the step-up in basis for ALL estates, even those under $10,000,000.

This would be disastrous to middle-class family wealth. In effect, the heirs would not face an estate tax but would instead be facing an income tax based on the difference between the deceased’s purchase price and the after-death sales price.

Of additional concern is how the states would respond to an eliminated estate tax. If less tax revenue is received by the federal government, less would be doled out to the states. It is not unforeseeable that some states, such as California, would institute their own estate or inheritance tax to make up for the shortfalls. The details of such a plan would be mere speculation but well within the realm of possibility.

What Would Remain The Same

Most estate planning really isn’t about taxes or money. It’s about assigning and empowering people you love and trust to make decisions on your behalf. It is about an orderly distribution of property, regardless of how much exists. It is about your health and well-being while alive. That will not go away or change.

Estate planning is primarily about state laws as opposed to federal laws. Although similar, each state has their own set of laws, rules, and cases about trusts, powers of attorney, and wills. Although these will undoubtedly change in the future, that is not anything new or unexpected.

I see the future of estate planning work to be largely the same with more emphasis on income tax planning or asset protection than estate or gift taxes.

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