Estate Planning in 2017 and Beyond


By Alexandra Smyser

We all know that the new president has made sweeping changes in just his first two weeks in office. Republicans control the WH and both houses of congress for only the second time in modern history. I have had several jittery clients reach out to ask what kind of changes might be on the horizon for estate tax and gift tax.

From the information we have been given from the new administration, President Trump’s plan is to repeal estate tax and generation skipping transfer tax. It is not clear if the gift tax will also be repealed.

Under the plan, the estate tax will be replaced with a capital gains tax of 20% on assets held until death and valued over $10MM. The transfer of small businesses and family farms would not be subject to this tax.

While the tax plan is very much speculative, according to experts, significant tax reform of some sort is likely. The administration has plans for infrastructure spending and the money has to come from somewhere. Moreover, estate tax historically has been seen as a revenue generator to build up a strong military. It is often reinstated in times of international conflicts with the US.

Estate tax used to be a concern for many middle class Americans, but that changed with enactment of the American Taxpayer Relief Act of 2012. ATRA “permanently” allows each of us to transfer $5,000,000 of wealth (indexed for inflation) without being subject to the estate tax. That means that a married couple that dies this year can transfer almost $11,000,000 without paying estate tax. 99.8% of Americans will never pay federal estate tax.

Why is this important to you? First of all, if you have an older trust that was drafted when estate tax was a concern to a greater number of persons, it would be wise to have it reviewed by an estate planning attorney. You can make changes now that will make it easier on your spouse and your family down the line. I like to draft for the greatest amount of flexibility because we do not necessarily know what the tax climate will be in the year that you die.

Second, the repeal of the estate tax does not lessen the importance of estate planning. There are many reasons you want to provide your beneficiaries with protection and relieve them of the burden of having to endure a lengthy probate period after your death. Proper planning also allows you to protect yourself and your estate in the event you are incapacitated.

I advise my clients to think of their legacy as much more than simply their financial wealth. Their planning should reflect their life’s priorities—providing for children, grandchildren, pets, their favorite charities and more.