What Trump’s Win Means for Estate Tax Planning

What Trump’s Win Means for Estate Tax Planning

Since the tax overhaul was enacted in 2017, few households have been subject to the alternative minimum tax. That’s because the law essentially restructured the AMT to apply mainly to a select number of upper-income households.

With the anticipated sunset of the tax overhaul in 2026 and the reversion to the pre-2018 AMT rules, a large subset of households would have found themselves owing AMT — many for the first time. Now, it seems likely that the current framework will be extended, as will the rules around state and local tax deductions and the higher standard deduction.

“On the SALT issue and the higher standard deduction, the main effect we have seen is that it has kept people from itemizing deductions,” Henry-Moreland said. “Another knock-on effect of the policy is that charitable giving trends have shifted to favor strategies like making qualified charitable distributions from retirement accounts and bigger contributions to donor-advised funds.”

More on the AMT

Henry-Moreland said it has been interesting to see how the different parts of the 2017 tax overhaul have played out in recent years, especially with respect to how the originally maligned SALT cap rules have not had as much of a negative impact on taxpayers in high-tax states as originally anticipated by some parties.

“Remember that, before 2017, a lot of people who did have high deductions for state and local taxes were also exposed to the alternative minimum tax,” Henry-Moreland noted. “As a result, they weren’t getting the full value of those deductions anyway prior to the TCJA changes. When TCJA happened, a lot of people didn’t end up paying much more in taxes, thanks to the AMT rule changes and just because rates were lowered generally.”

At the very high end of the income spectrum, people in the top brackets in the highest-tax states have theoretically owed more taxes. But many of these people are business owners who can use pass-through entities to help reduce what they ultimately pay in taxes each year.

“I would say that, for the majority of advisory clients in that income range of $200,000 to $500,000 or so, they haven’t ended up paying more in taxes under the current framework,” Henry-Moreland said.

A Second Opinion

Written comments shared Wednesday by Leslie Gillin Bohner, the chief fiduciary officer and general trust counsel at Fiduciary Trust International, echoed much of Henry-Moreland’s perspective.

“I believe there is clarity,” Bohner wrote. “Most 2017 Tax Cuts and Jobs Act provisions will likely be extended. So there is no rush to change estate plans and most individuals can adopt a wait-and-see approach and do planning on their own timeline to use their remaining exemption amounts.”

There may be other tax cuts, Bohner added, but it is too soon to tell while we wait to see if the GOP retains control of the House.

“It is always a good time to review existing plans in light of life changes, such as divorce or death of a spouse, and to make sure that you have the foundational documents such as wills, financial and healthcare powers of attorney in place,” she concluded.

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