President elect Donald Trump is scheduled to take office this Friday on January 20. With every new president comes a plethora of proposed changes. Trump’s presidency will possibly have an impact on estate planning. Some of his plans include repealing both estate taxes and gift taxes. Consequently, this has left individuals at unease about what to do with their estate plan and how to go about changing it according to new federal requirements. Here are some potential changes that would be worth revising in your estate plan:
Repealing Estate Taxes
Repealing estate taxes is a change that Trump and Republicans are striving towards. This would be one of the more likely components subject to change. Estate taxes are imposed on a heir’s portion of an estate. This excludes the inheritance of a spouse due to the unlimited marital deduction. Since the estate tax is so high, it is only levied on estates exceeding 5.45 million dollars. The nickname of the “death tax” displays the popularity of its repeal despite the fact that roughly 2 of every 1,000 estates face the estate tax and .02% of Americans pay it. This repeal could lead to changes in the way capital gains will be taxed which would
evidently have a larger effect. It would also make asset protection easier because individuals would no longer need to satisfy estate tax requirements.
Though favored, there are some concerns about the repeal of estate taxes. Some people are worried about whether there would be a replacement of the estate tax. We are not certain exactly when or if it would be effective and for how long. There could also be a chance that the estate tax could come back in a different form.
Repealing Gift Taxes
The gift tax exists to prevent citizens from avoiding the estate tax by giving away their money before they die. However, gift taxes can be used to get out of paying estate taxes. The exclusion of gift taxes is $14,000 meaning, you are able to give up to $14,000 to different people per year without being taxed for it. This way, you could gift your money to an unlimited amount people while you’re still living so that when you die, that property or money doesn’t get taxed. The repeal of the gift tax is less likely to occur. The gift tax does serve other significant purposes.
The gift tax acts as a backstop for the estate tax and ensures the payment of the income tax. Without the gift tax, taxpayers can shift income to family members in lower tax brackets. That family member can now sell the asset at a lower rate and then gift the profit back to the original taxpayer. In doing this, the income tax is undermined because some of the taxable funds are now exempt from being taxed.
Keeping up With Changing Estate Planning Laws
With a new president, change is to be expected. With the repeal of the estate tax and the gift tax, there are potential benefits for families. Asset protection could be made easier without the need of satisfying state requirements. Furthermore, families can save a lot more money without gift taxes. Individuals may also have more readily distribute income and assets that do not need to follow strict guidelines. If need be, changing your estate plan accordingly could be strenuous. The best course of action is to contact a professional estate planning attorney. Contact Attorney Inna Fershteyn for expert estate planning and asset protection assistance. Do not hesitate to call us for any further questions at (718)-333-2394.