We had previously discussed what our taxes may look like if Hillary Clinton was elected president. Last Monday’s debate demonstrated how different the two candidates are. Whoever is elected, it is important to understand the impacts and effects of the tax law changes to you, and potentially your estate plan.
The director of education at the American Academy of Estate Planning Attorneys, Steve Harnett, wrote a nice piece summarizing Donald Trump’s Tax Plan.
In the estate tax realm, The Donald plans to eliminate the tax altogether. On its face that seems like a good thing (less taxes is typically good for all of us). However, this needs to be put into perspective. The current federal estate tax exemption amount (i.e. no tax on any dollars less than the exemption) is $5.45 million. At this level there will be about 10,800 estate tax returns filed in 2015, of which only 5,300 will actually owe a tax. Only multi-multi-millionaires and billionaires will pay an estate tax. This is not even the “1%”. This is the 0.2%! The other 99.8% of the people will not pay an estate tax. So Donald’s plan is to eliminate something that has effectively already been eliminated.
Donald does propose to get some of the tax back on estate valued over $10 million by not allowing a “Step-Up” in cost basis. This will create additional capital gains tax upon the estates selling the assets.
As for income tax, the Donald looks to be cutting taxes across the board, though his actual tax proposal seems to be continually changing. As Steve Harnett points out, the reductions for low income earners is about 1.2% and those with higher earnings would receive a 10.2% reduction. The one good thing with Donald’s proposal is a simplification of the tax brackets, cutting them from 7 to 3. For a more detailed analysis you can look here.
Taxes are the bane of our existence. However, living in a civilized society has a cost (we just hope the government spend those dollars wisely). So taxes are inevitable. In a presidential election year, the changes in the tax laws is inevitable as a new president is sworn in. We, as citizens, just need to be ready for the new laws’ impact on us.
To learn more about taxes and the presidential race and how it affects your estate planning, please reach out to our estate planning team by calling (888) 222-1328.