The Impact of the Presidential Election on Estate TaxesJanuary 10, 2025
The 2024 presidential election has concluded, and with Donald Trump returning to the White House, significant changes to tax policies, including estate taxes, could be on the horizon. As estate taxes play a crucial role in estate planning, understanding how potential changes might impact you is essential.
Whether you’re planning for wealth transfer or protecting your assets, this guide will help you prepare for what lies ahead.
The Current Estate Tax Landscape
Under the Tax Cuts and Jobs Act (TCJA) of 2017, the federal estate tax exemption is at historic highs—currently $13.61 million per individual or $27.22 million for married couples (as of 2024). This means estates valued under these thresholds are not subject to federal estate tax, which is capped at a 40% rate.
However, without intervention, these provisions are set to expire on January 1, 2026, reverting the exemption to approximately $5 million per individual (adjusted for inflation). This reduction would expose more estates to taxation, creating urgency for those with significant assets to plan ahead.
What Changes Could We See Under President Trump?
While specific policies have not yet been enacted, President Trump’s tax agenda and Republican priorities suggest possible changes to estate tax laws, including:
1. Permanently Extending the TCJA Estate Tax Provisions
One of Trump’s key tax goals is to make the TCJA’s increased estate tax exemption permanent. This would maintain the higher exemption levels, shielding many estates from federal taxation.
2. Eliminating the Federal Estate Tax
The Republican Study Committee’s FY 2025 budget proposal includes eliminating the federal estate tax altogether. While this is a long-standing goal of the Republican Party, its feasibility depends on legislative support and revenue offsets.
3. Indexing Capital Gains to Inflation
Capital gains tax rules could also change under the new administration. Proposals to index capital gains to inflation might reduce the taxable gains on appreciated assets, potentially affecting estate planning strategies.
How Estate Tax Changes Could Affect You
Estate tax policies have far-reaching implications for individuals and families. Here’s how potential changes might impact your estate planning:
- Increased Exemptions: If the higher exemptions remain, fewer estates will face federal estate taxes, offering more flexibility in wealth transfer strategies.
- Removal of the Estate Tax: Eliminating the tax could simplify estate planning for many families, but may also reduce incentives for charitable giving and other tax-saving strategies.
- Changes to Capital Gains Taxation: Modifications to capital gains rules, such as eliminating or altering the “step-up in basis,” could increase tax burdens on inherited assets.
What Steps Should You Take to Prepare?
Regardless of the legislative outcome, proactive estate planning is essential. Here are some steps you can take:
1. Review Your Estate Plan Regularly
With potential changes on the horizon, reviewing your estate plan every 5-10 years—or after major life events—is critical. Ensure your plan reflects current laws and accounts for potential future shifts.
2. Utilize the Current Exemption
If you have a high net worth, consider taking advantage of the current $13.61 million exemption before it potentially decreases in 2026. This may include gifting assets to heirs or establishing trusts.
3. Consult with an Estate Planning Attorney
Estate tax laws are complex and subject to change. A qualified estate planning attorney can help you navigate evolving regulations, minimize tax liabilities, and protect your legacy.
Why Work with Daley Zucker for Estate Planning in Harrisburg, PA?
At Daley Zucker, our experienced attorneys understand the complexities of federal and Pennsylvania estate tax laws. We provide tailored advice to help you adapt to changes in tax policies, ensuring your estate plan aligns with your financial goals and family’s needs.
Our services include:
- Comprehensive estate plan reviews
- Gifting strategies to reduce taxable estates
- Creation of trusts to safeguard assets
- Guidance on tax-efficient wealth transfers
Located in Harrisburg, PA, we serve clients across Central Pennsylvania with personalized, effective estate planning solutions.
FAQs About Estate Taxes Under the New Administration
Will the Estate Tax Be Eliminated?
While the elimination of the federal estate tax is a Republican priority, it requires legislative action. Its feasibility will depend on Congress and budget considerations.
What Happens If the TCJA Provisions Expire?
If the TCJA provisions expire in 2026, the estate tax exemption will revert to approximately $5 million per individual, increasing the number of estates subject to federal tax.
How Can I Reduce My Estate Tax Liability?
Options include lifetime gifting, creating irrevocable trusts, and leveraging tax-efficient strategies with the guidance of an estate planning attorney.
