A sense of uncertainty has emerged under the new administration surrounding estate planning for the year 2017. President Trump has expressed his intent to implement significant changes to U.S. tax policy. However, the degree to which those changes will occur remains ambiguous. Nevertheless, there are strategies that individuals, families and small businesses can use when faced with new issues regarding tax, wealth-transfer and business succession.
Trump has stated that his plan will repeal the federal gift and estate taxes. However, the plan raises a major concern of how Trump’s plan would change the step-up in basis rules for assets owned by a decedent at death that have increased in value. As a result of such modifications, a death would be deemed a “sale” of the assets owned by the decedent, thus causing capital gains to be realized. But only capital gains in an amount of more than $10 million would be taxable. Furthermore, contributions of appreciated assets to a private charity that was created by the decedent or a member of the decedent’s family, would not escape the capital gains tax upon the person’s death. Trump’s proposal has created much uncertainty regarding federal and gift estate tax.
It is likely that any removal of an existing tax will occur along with some type of compromise. For instance, President Trump has already said that a repeal of the estate tax would occur along with a repeal of the step-up in basis for assets inherited from a decedent. Since his plan may involve widespread reform in individual, corporate, capital gains and transfer taxes, there are limitless ways in how that can be accomplished.
Therefore, it is sensible to review your estate planning documents to decide whether you would like to make any changes, and to make certain that you do not make any taxable gifts that are subject to the gift tax.