Estate Tax Planning on Hold with Incoming Administration
With a new administration taking office in Washington, D.C., there is a lot of uncertainty as to what the future holds related to the federal estate tax. As a result, many people are taking a wait-and-see approach to their estate planning until there is more clarity on what they can expect moving forward.
President-Elect Donald Trump has repeatedly stated that he wishes to roll out a tax plan that would entirely eliminate the gift, estate and generation-skipping transfer taxes. The transfer taxes would be replaced with a new capital gains tax on appreciated assets a beneficiary inherits from the decedent. This would result in major overhauls to individuals’ estate plan, as they would be incentive to focus on reducing their capital gains taxes rather than their estate or transfer taxes.
These potential changes would only affect people with large estates (those valued at more than $5.45 million for an individual). These individuals would need to revisit their wills, trusts and other estate planning documents. Trump’s plan could also revoke most of the regulations the Internal Revenue Service (IRS) has proposed recently — a move that would get rid of valuation discounts for interests in certain family entities.
Existing law dictates estate planning strategies
Existing federal law exempts from estate taxes any individuals with estates worth less than $5.45 million ($10.9 million for couples). Any amount above that threshold is taxed at a rate of 40 percent. To that end, individuals and couples who have high-value estates typically attempt to reduce the value of their estates as much as possible, using tools like trusts and charitable donations.
During this time of uncertainty, it’s important to be up to date on any changes occurring to federal or state tax laws. For the guidance and advice you need, meet with a skilled Tampa estate planning attorney at BaumannKangas Estate Law.