Does it Matter if Federal Estate Taxes Go Away Under President Trump?
Candidate Donald Trump said and tweeted a great many things when he ran for president. While his views on immigration and the weight of beauty contestants received a lot of attention, the candidate also vowed to repeal the federal estate and gift tax for everyone. Now that he is President-elect Trump and the Republicans are the majority in both branches of Congress, this could happen.
According to the IRS, the scheduled estate tax threshold for exemption in 2017 will be $5.49 million per individual, which will be up from $5.45 million in 2016. Obviously this would be a huge gift to the wealthy, but there are already ways to avoid or reduce the amount of estate and gift taxes paid.
Setting up a trust is the most common option and still may be the safest as the winds of political change blow. Eschewing the controversy surrounding Trump’s refusal to go public with his own tax returns, let’s take a page from former presidential candidate Mitt Romney. His estimated net worth was last listed in 2014 at $250 million, but a variety of trusts set up through his family and business (Bain Capitol) allowed him to avoid paying taxes at rate that would otherwise be about 50 percent. Romney did this by removing assets from his estate and putting them in irrevocable trusts. These trusts allow him to draw income while leaving the wealth and appreciation tax free after his (and his wife’s) death when it is passed to his heirs.
But it is not just the extremely wealthy that can set up family and gift trusts. Trusts can be useful to many for avoiding probate, gaining more flexibility with their assets and taking advantage of certain strategies to avoid or reduce the aforementioned taxes.
If you, a friend or a family member is considering setting up a trust or otherwise trying to manage estate taxes, the first step should be to speak with an attorney with a background in estate planning and trusts. They can help you come up with plan that is tailor-made for the individual family, even those of more modest but still substantial means.