About the author:
Christopher Floss is a Chicago-based attorney concentrating on estate planning and tax planning matters. He enjoys working with clients who are seeking to plan for the future through a comprehensive estate plan that addresses the client’s short-term and long-term objectives. Chris’s thought leadership can be found on this blog, as well as on other social media platforms. Notably, the American Bar Association’s Section on Taxation published Chris’s law review article, “Does 3.8% Change Anything? The Intersection of the Net Investment Income Tax and Fiduciary Income Tax,” in its Winter 2016 edition of The Tax Lawyer. For further information on the contents of this blog, Chris may be contacted at 312-786-2250 or at firstname.lastname@example.org
With the rise of the Trump era, estate planning professionals are struggling to field a common question which is being cast from a vast group of clientele: will I have to re-do my estate plan now that Trump is president? As in all things legal, the right answer to this question is “it depends.”
During his campaign, Trump proposed an entire repeal of the federal estate tax. If this repeal occurs, many of the tax planning techniques currently used by estate planners will be extinct, such as: (1) the balancing of the federal estate tax exemption and the use of the marital deduction through marital and family trusts, (2) the extensive valuation planning for clients who have a net worth in excess of the federal exemption amount, and (3) the use of complex charitable giving vehicles to transfer wealth to charity in a tax-friendly manner.
Furthermore, clients who have taken extensive measures to plan for the impact of the current federal estate tax may find themselves revisiting the transfer techniques employed in their current plans in order to maximize income tax planning, which, in some instances, has taken a “back seat” to the estate tax planning in higher net worth scenarios. With all of these factors at issue, what does one do?
At this point, there’s no need to deviate from the planning that occurs under current law. Single-find QTIPs, A-B Trusts, GRATs, CLTs, FLPs – the tools for which these acronyms stand are still in good use until further notice. However, if a repeal of the federal estate tax occurs, it may be wise to revisit one’s estate plan so that the planning structure allows for the utilization of basis step-up at death and the most effective means to minimize income tax at the fiduciary level.
As anyone who has engaged in the estate planning process knows, federal tax planning is not the only concern addressed in the planning process. Other issues, such as state estate tax planning (if applicable), asset protection and control, and planning for incapacity, still remain very pertinent to the estate planning process.
Most commentators suggest that a repeal of the federal estate tax will not be proposed right away. Some actually indicate that such a proposal will not occur until the latter years of Trump’s presidency. In any case, estate planning professionals will be “standing by” until further notice.