November 09, 2016
What Does the Trump Presidential Victory Mean for Your Estate Planning?
Donald Trump is now, President-Elect Donald Trump. Donald Trump will now be the 45th President of the United States. No only is he the next President of the United States, but also the Republican party now also controls the House and Senate. So what does a Donald Trump presidential victory mean for your estate planning? How does the Trump victory effect your estate taxes? How will President Donald Trump effect your gift taxes?
Well, at first nothing much. He took some policy positions during the race, now it’s time which of those policy positions will be implemented.
President-Elect Donald Trump and Your Estate Taxes
Currently, the estate tax exemption is set at $5.45 million (set to go to $5.49 million in 2017). Meaning if you have less that $5.45 million as part of your estate, you do not pay any estate or death taxes when you pass away. President-Elect Donald Trump had ran his campaign on repealing the estate tax entirely. However, there would still be capital gains on assets valued over $10million. Directly from President-Elect Donald Trump’s website:
The Trump Plan will repeal the death tax, but capital gains held until death and valued over $10 million will be subject to tax to exempt small businesses and family farms. To prevent abuse, contributions of appreciated assets into a private charity established by the decedent or the decedent’s relatives will be disallowed.
What Donald Trump’s presidential victory means for your estate plan with regards to estate taxes is that all of those A/B marital deduction trusts for married couples or ILIT’s to get around the estate tax are pretty pointless now (they were pretty pointless for a majority of my clients anyways with a $5.45 million exemption). If you have one of those trusts, it may make sense to strip out that language and look to simplify the planning.
President-Elect Donald Trump and Your Gift Taxes
One way many people look to pass wealth down to the next generation is through gifting. Personally, I am not a huge fan of gifting for two reasons. First, you lose control of the assets. Once gifted away, chances are you’re not getting that asset back if you were to need it. Second, while you can gift for tax purposes, you cannot for Medicaid or Long-term care purposes due to the Medicaid look back.
That said, let’s explore how the Donald Trump presidential victory effects your gift taxes. Currently, you can gift $14,000 to as many people as you want, gift tax free. On top of that you have a lifetime gift tax exclusion of $5.45 million. Meaning you can gift over $5 million without paying any gift taxes at all.
President-Elect Donald Trump’s position while he was on the campaign trail was that he will repeal the gift tax entirely. However, it is not mentioned on his policy page.
How Will President Elect Donald Trump Effect Your Estate Planning?
At the end of the day, what should you do with regards to your estate planning with the Donald Trump presidential victory? Well, right away, you don’t need to do anything (A relief right?).
That said, it will be important to see which of his policies become implemented. For the wealthy, with the repeal of the gift and estate tax, it would be easier to pass that money down to the next generation without cutting in Uncle Sam (or charities, who are the real winners with lower gift tax and estate tax exemptions). One thing is almost a sure bet, the estate tax is on the way out, one way or another, as it has been for many of my clients.
Now what? If you want your Michigan estate plan reviewed for this new Donald Trump as president environment, attend one of our upcoming estate planning workshops that are held weekly at one of our Michigan estate planning offices.