An end to the estate tax does not mean an end to estate planning.
In just a few short days, Donald Trump will be sworn in as the 45th President of the United States.
Not a fan of the estate tax, Donald Trump has proposed to work with the Republicans in the House of Representatives to put an end to its 100-year existence.
Originally levied in 1916, the purpose of the estate tax was to help pay for the First World War and limit pockets of wealth.
Obviously, the first reason is no longer necessary.
So what will this mean for America?
According to The Wall Street Journal article titled “Strategies for Playing Trump’s New Estate-Tax Plans,” chances are it will not affect your estate.
Although the repeal is all but guaranteed, it is difficult to predict with 100 percent accuracy the working and timing of Congressional decisions.
Millionaires and billionaires are really the only ones who will be receiving a tax cut.
This includes numerous decision makers on Capitol Hill.
The gift tax is separate from the estate tax.
This tax affects transfers while one is alive and to the “step-up” income tax provisions.
What is the “step-up” provision?
It enables assets held at the time of death to avoid capital-gains tax.
Does this apply to all assets?
Not-yet-taxed retirement funds are excluded.
What does Trump propose?
He wants to terminate the step-up above an exemption reaching a maximum of about $10 million.
Anything greater than this amount would transfer the appreciated value of a capital asset to the heirs.
So what should you do?
Find and work with and experienced estate planning attorney.
Create a will and/or trust for you needs and circumstances.
Do not make taxable gifts.
Avoid “valuation discounts” as these are likely to be eliminated or limited.
Continue updating and reviewing your estate plan with your attorney so you will not be caught off-guard by any changes in Congress.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: The Wall Street Journal (December 9, 2016) “Strategies for Playing Trump’s New Estate-Tax Plans”