Trump’s Second Term: What It Could Mean for Your Estate Plan
The election of Donald Trump may have implications across various sectors, including estate planning. As estate planning strategies are deeply tied to federal tax policies, any changes in the administration often signal a shift in the regulatory and financial landscape. President Trump’s tax policies, particularly those from his previous administration, provide insights into how his re-election could impact estate planning for individuals and families.
1. Estate and Gift Tax Exemptions
One of the most significant changes from Trump’s first term was the passage of the Tax Cuts and Jobs Act (TCJA) in 2017. This legislation nearly doubled the federal estate and gift tax exemption, increasing it from $5.49 million per individual in 2017 to $11.18 million in 2018, with adjustments for inflation. In 2024, the exemption stands at $13.61 million per individual ($27.22 million for married couples).
Should Trump continue his tax policies, there is potential for efforts to make this higher exemption permanent. Currently, the TCJA provisions are set to expire in 2026, reverting the exemption back to pre-2018 levels (adjusted for inflation). If the exemption decreases, more estates will become subject to federal estate taxes, creating an urgency for high-net-worth individuals to maximize their tax-saving opportunities before 2026.
2. Elimination or Modification of the Step-Up in Basis
The step-up in basis allows heirs to reset the cost basis of inherited assets to market value at the date of the decedent’s death, reducing capital gains taxes when those assets are sold. During his presidency, President Trump preserved the step-up in basis, whereas opponents have proposed eliminating it to increase tax revenue. A second Trump term may signal the continuation of favorable tax treatments for inherited assets, but this remains a critical area to monitor as tax reforms evolve.
3. Potential Reduction in Estate Tax Rates
Another avenue Trump could pursue is a reduction in the estate tax rate, which is currently 40% at the federal level for amounts exceeding the exemption. Lowering this rate could further reduce the tax burden on wealth transfers.
4. Legislative Uncertainty
While President Trump’s past policies provide some guidance, legislative priorities depend on Congress’s composition. Estate planning strategies must remain flexible to adapt to changes that may arise from political negotiations or shifts in economic conditions.
5. State-Level Considerations
In addition to federal policies, it’s essential to consider state estate and inheritance taxes, which vary widely. Some states impose their own taxes with significantly lower exemptions than the federal level.
Conclusion
The election of Donald Trump could extend or amplify the estate planning opportunities created during his first term. However, the uncertainty surrounding future tax legislation makes proactive planning crucial. High-net-worth individuals and families should consult estate planning professionals to take advantage of the current tax landscape and prepare for potential changes.
Whether maximizing lifetime gifting, setting up trusts, or planning for generational wealth transfers, staying informed and agile is the key to effective estate planning in any political environment.