Nothing--under ordinary times--is certain except death and taxes. But under President Donald Trump--only death is certain.
Yes, taxes--and especially estate taxes--go away. Or at least that's what President-elect Trump has proposed. So, what might you do to prepare for the possibility of estate taxes going away?
In a recent edition of Steve Leimberg's Estate Planning Newsletter, estate planning attorneys Jonathan Blattmachr and Marty Shenkman detailed in about 6,000 words what might happen.
Start first with this: "While no one can determine without a Ouija Board what will happen, these authors believe that the estate tax is doomed," wrote Blattmachr, director of estate planning for Peak Trust Company, and Shenkman, an attorney and co-author of The Tools & Techniques of Estate Planning.
Doomed, yes. But what comes next and when is anyone's guess. Consider, according to Blattmachr and Shenkman, the range of possible tax scenarios given the election results:
- Immediately permanent repeal of the gift, estate, and generation-skipping transfer (GST) tax.
- Permanent repeal of all transfer taxes to take effect over some phase-out period, for example ten years similar to what occurred in 2001. This would also present the risk that the tax may be changed again during such phase out period as happened in the past, wrote Blattmachr and Shenkman. It is not clear that a President Trump would be satisfied with such a lukewarm version of repeal.
- Repeal of the estate tax but retention of the gift tax as a backstop to the income tax.
- Repeal of the estate tax (with or without a repeal of the gift tax) and carryover basis.
- Repeal of the estate tax (with or without a repeal of the gift tax) and a capital gains tax on death - a capital gains tax on death, for instance. Or maybe a President Trump would treat inheritances as ordinary income.
Another uncertainty is the timing of any estate tax repeal. It might be effective January 1, 2017, or delayed to 2018, or phased in over ten years, or... well, your guess is as good as anyone's.