RFG Advisory - Latest News & Updates

Estate Planning in the Era of Trump

by: Staff
published: February, 14th 2017


Estate Planning in the Era of Trump

By: Howard Neiswender Attorney at Law Sirote & Permutt, PC.

 

Opportunity: An Advisor received an inquiry from his largest client who is contemplating setting up a defective trust. The client had conflicting advice from their CPA and estate attorney regarding the necessity and timing around setting up the trust.

Solution: RFG Advisory Group reached out to our go-to expert in the area of estate planning – Attorney at Sirote & Permutt, PC Howard Neiswender for some insights. 

 

1With Trump as President, the latest thoughts are to wait on setting up a defective trust.  Trump plans to send out his agenda in August and the latest thinking is that he will do away with Estate taxes. Will there be Estate taxes now that Trump is President?

  • All the people I know that are plugged into the Washington, DC scene tell me that it is highly unlikely that the estate tax will be repealed.  They are saying it is not certain by any stretch that Trump and the Republicans can get 51 votes for repeal in the Senate, much less 60 votes.  As we see on a daily basis, Trump is very polarizing even with the Republicans.  The typical Trump voter could care less about the death tax.

 

2. This (the repeal of estate taxes) of course isn’t easy to do because anything Trump takes away he has to add (his polices have to be tax neutral).

  • The major beneficiaries of such a repeal would be Trump and his Cabinet members, most of whom are extremely wealthy.  Most Americans would see this as unfair and self-serving.
     

3. With Obama (and if Hillary did win) the minority discounts were set to go away for family transfers.  Now the thought is Trump will not take that away.

  • There is a big gap between the wealthy and the middle class in this country, and that gap is growing.  The estate tax serves as a way of redistributing wealth and making sure Elon Musk's grandchildren don't own everything in the country.

 

 4.  Another big issues are gift taxes. The latest theory is he will not do away with gift taxes.  So does that mean we will not do gifts and just wait to transfer assets at death? 

  • Even if repealed, Trump is on record for saying he wants to replace the estate tax with the Canadian system of taxing capital gains at death.  This could be just as devastating as the estate tax.

 

5.  One last big issue is right now estates get a tax stepped up basis at death.  Again no one knows, but that might be taken away.

  • We can't afford not to have the estate tax or something similar to it due to the huge deficits we are running as a country.  At some point in the future, even if it is repealed, the Democrats will be back in control and could reinstate it as it has been 5 times in the history of the estate tax.
  • The estate tax has in essence already been repealed for 99%+ of the country.  It only affects people with estates over $5,490,000 / $10,980,000.  The average American says that they are against the death tax until they are educated and learn it doesn't apply to them, that if repealed set-up basis at death goes away (which hurts the average person much more) and that the revenue will have to be replaced from somewhere since we can't cut costs enough to make up the difference.
  • Trump ran his campaign based on corporate tax reform and individual tax reform.  Both of these will cost the government trillions of tax dollars if implemented.  Trump, being a good negotiator, will likely take these over estate tax repeal any day.  Getting all three will be almost impossible.
  • In 2010 (the one year where we did not have an estate tax) the gift tax exemption was reduced to $1,000,000, which severely limited our ability to do lifetime planning.
  • With my clients, we are pressing forward with freezing their estates and moving as much as we can totally out of the wealth transfer system for literally hundreds of years.  We are protecting their wealth not only from transfer taxes, but also things like divorce and bankruptcy, which can be even more devastating than taxes.  We are shifting all future growth out of the wealth transfer tax system as well.

 

Conclusion: 

I know what the laws are now and the tremendous value I can bring my clients today. I have no idea what the future holds, but am confident it is not going to be as simple and easy as full repeal of the estate tax with no consequences and no chance of reinstatement. Bottom line, I would urge your client to be proactive today versus being reactive to whatever happens in the future.

 

 

 

Howard Neiswender advises estates worth in excess of $15 billion. His specialty is working with individuals throughout the United States with wealth in excess of $15 million in the core area of business planning, income and estate tax planning, asset protection planning and charitable planning.

 

This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation. {Insert Advisor's DBA} and LPL Financial do not provide legal advice or services. Howard Neiswender Attorney at Law Sirote & Permutt, PC is not affiliated with RFG Advisory Group and LPL Financial.