Preparing Clients for Planned Tax Changes Under Trump

Commentary on the Wall Street Journal article by Laura Saunders

President-elect Donald Trump and the GOP-controlled Congress have pledged to do away with the 100-year-old estate tax, the Wall Street Journal writes. Financial advisors can help clients prepare — regardless of what happens.

Helping the 0.2% And What the Rest Should Do

In 1976, when the estate-tax exemption was just $60,000, 7.7% of Americans were affected by it, the publication writes.

But in 2017, it’s expected to apply to about 5,200 people, or just 0.2% of the U.S. population, thanks to the current exemption of $5.45 million for individuals or $10.9 million for married couples, according to the Journal.

On the other hand, there’s uncertainty about the future of the gift tax, applicable to lifetime gifts, and the step-up provision of the income tax, which allows skipping the capital-gains tax on assets at the time of death, according to the publication.

To prepare their clients for any eventuality, advisors should urge them to sign a will as soon as possible, the Journal writes. Carol Harrington, an estate lawyer with McDermott, Will & Emery, tells the publication that allowing an executor or trustee some room for maneuver will build some flexibility into the will to prepare their clients for the vagaries of Congress.

Harrington also suggests refraining from taxable gifts unless necessary, the Journal writes. But tax-free gifts — which cap at $14,000 per year per recipient — are perfectly fine, the Journal writes.

The publication also says there’s no need to load up on valuation discounts used to reduce estate and gift tax liability. Curbs on the technique proposed this year by the Treasury Department aren’t likely to go into effect, according to the Journal.

Source: The Wall Street Journal

Posted by: The Trust Advisor…


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