Wondering if your estate plan needs a makeover if Donald Trump wins in 2024? You're not alone. With the election just around the corner, many Americans are contemplating what a second Trump term might mean for their hard-earned assets.
GOBankingRates consulted with top estate planning experts to provide insights on what you need to know about estate planning under Trump’s potential second term.
Estate Tax Exemption: Rising Limits Alexander M. Evans, an estate planning attorney at Turke & Steil LLP, believes Trump might continue to support ultra-wealthy estates. "Trump has been supportive of maintaining or increasing the estate tax exemption," Evans notes. This could mean higher thresholds before estates are taxed, benefiting the very wealthy.
George Pikounis, a financial advisor at Burns Estate Planning, offers more details: "For estates exceeding just under $7 million, a Trump victory could significantly impact estate taxes. He increased the estate tax exemption from $6 million to $13.61 million in his first term and aims to make these limits permanent if re-elected."
Simplifying the "Shell Game" Anthony Termini, an expert contributor at Annuity.org, describes estate planning as a "shell game," involving the transfer of asset ownership without losing control. He predicts Trump might simplify this process: "If Trump is re-elected, I expect tax laws to change, making it easier to move assets out of a taxable estate."
Termini suggests this could result in a higher lifetime gift tax exemption and a substantial increase in the annual gift tax exclusion.
Lauren Klein, owner and lead attorney at Flourish Law Group, echoes this sentiment: "Trump might continue advocating for higher federal estate and gift tax exemptions. This would benefit individuals with larger estates, potentially reducing the number of estates subject to federal estate and gift taxes." However, Klein cautions that this would not benefit the majority of Americans.
Business Owners: Potential Benefits If you own a large business, you might be in luck. Evans anticipates continued support for business owners, which could influence estate planning for family-owned businesses. This support could include favorable tax treatments and incentives for passing businesses to the next generation.
Healthcare: A Variable Factor Evans also warns of potential changes or cuts to Medicare and Medicaid, which could impact long-term care planning. "This might push more individuals to consider private insurance options or allocate larger portions of their estate for healthcare needs," he explains.
Capital Gains: Potential Savings Trump's first term saw a reduction in capital gains tax rates, and Klein believes a second term could bring similar benefits. "If re-elected, Trump could push to keep capital gains tax rates low, affecting the taxation of estate planning structures," she says. This means that selling inherited assets could result in more savings.
Step-Up in Basis: Retaining Benefits The "step-up in basis" tax rule could significantly benefit your heirs, and Klein believes it's likely to remain under Trump. "Proposals under the Biden administration aimed to reduce the availability of a step-up in basis for assets with larger gains," she explains. "It's extremely unlikely that a Trump administration would pursue similar changes, keeping this provision intact."
In simpler terms, inheriting the family home that has appreciated in value could mean selling it without paying significant capital gains taxes.
Flexibility is Key Regardless of the election outcome, Cory Krueger, a top Texas probate attorney, emphasizes the importance of flexibility in estate planning. "Given the unpredictable nature of recent elections, it's best to keep estate plans adaptable to changing laws," he advises.
Krueger recommends regular reviews with an estate planning attorney to stay informed about potential policy changes. Regardless of the political climate, staying proactive with your estate plan is crucial.
