For Mark Roberts’ Use: A hotly-contested election is one thing; once a new president begins to roll out their proposed budgetary changes, we have a whole new set of ideas to debate. One of President Trump’s campaign promises was to revise the tax code, and his recently proposed budget includes some major changes in that area.
In particular, we’re talking about the federal tax on estates. Currently, once you pass away your heirs could owe taxes on your estate, assuming the sum of your assets totals 5.49 million or more. In that case, your heirs could owe up to 40 percent of their inheritance in federal taxes. For decades, critics of the estate tax have said that the levy is unfair, considering that you already paid taxes on your income throughout your lifetime.
So, if President Trump’s budget passes through Congress and is approved, you might believe that certain estate planning maneuvers (such as establishment of a trust) are now unnecessary.
Of course, nothing is that simple. First of all, some states also impose an estate tax. Others (such as California) are considering implementing one. Even if Trump succeeds in eliminating the federal estate tax, there is no guarantee that individual states won’t leap to create a new tax to take its place.
Not to mention, anything that can be repealed can be reinstated later. So if you’ve already established a trust, you didn’t waste your time and effort. If you’re considering this move, it might still be a good idea for other reasons, even if the estate tax is repealed. There are plenty of other very good reasons to establish a trust, to shelter your assets and pass them to your heirs.
Finally, keep in mind that budgetary proposals usually endure a number of changes before finally becoming law. There is no guarantee that Trump’s proposals will pass as they stand; in fact, it’s more likely that they will undergo some revision.
So, the bottom line is that we are far from seeing a repeal of estate taxes, even though that is certainly possible within the year. Even if the estate tax does go the way of the dodo bird, other inheritance-based taxes can take its place. Remain vigilant, and continue consulting with us as well as your estate planning attorney, to create the most tax-friendly estate plan possible for your situation.