What Trump's Win Means for Estate Tax Planning - Lowthrop Richards

What Trump’s Win Means for Estate Tax Planning

With Donald Trump’s victory in the 2024 presidential election, estate tax planning is likely to see significant shifts, particularly regarding the extension of tax policies that have benefited high-net-worth individuals. Trump’s proposed policies are centered around the continued support for tax cuts and potential estate tax relief, shaping the future of estate planning.

Extension of the 2017 Tax Cuts and Jobs Act

One of the major implications of Trump’s win is the likely extension of provisions from the 2017 Tax Cuts and Jobs Act (TCJA). This includes maintaining the historically high estate tax exemption, which will increase to $13.9 million per person as of January 1, 2025. With Republicans potentially controlling both the White House and Congress, financial experts expect these provisions to be extended beyond 2025, giving individuals more time to benefit from the high exemption limits before any changes could occur.

This extension could be a major win for wealthy families, as it allows them to transfer significant assets to heirs without triggering estate taxes. The TCJA also brought changes to the standard deduction, lower income tax brackets, and a revised alternative minimum tax (AMT), all of which have made tax planning more favorable for high earners.

Possibility of Estate Tax Repeal

While estate tax relief under Trump’s administration is highly likely, the ultimate goal of repealing the estate tax altogether remains a policy potential. The initial version of the 2017 tax overhaul proposed full repeal, which is now being reconsidered as a realistic possibility. The estate tax exemption has already been raised to a level that only applies to a small fraction of the wealthiest Americans, but repealing it entirely would have major consequences for estate planning, particularly for large estates.

State Taxes and Local Considerations

Even with federal estate tax changes, individuals must also consider state-specific estate and inheritance taxes. While many states have their own estate tax and estate tax exemptions, state exemptions are often much lower than the federal limit. As estate tax planning under the new administration may involve more generous exemptions, individuals in high-tax states may continue to explore strategies for shielding their estates from both state and federal tax liabilities.

How These Changes Impact California

While California does not impose an estate tax, its income tax rates are some of the highest in the nation.

If federal estate tax exemptions continue to be extended or the estate tax is repealed, wealthy Californians will benefit from a more favorable landscape for transferring wealth. However, they still need to consider the state’s other taxes, including capital gains tax, which could increase the overall tax liability when assets are sold or passed on.

As a high-income state, California could be an attractive location for wealthy families to consider estate planning strategies that limit exposure to the state’s taxes. Trusts, gifting strategies, and tax-efficient wealth transfers will remain key strategies for mitigating both federal and state taxes. Additionally, California residents need to plan for the potential of tax policy changes at the state level, as the state’s tax laws could evolve in response to federal estate tax reform

Conclusion

As the political landscape shifts with Trump’s return to the White House, it is crucial for high-net-worth individuals to stay informed about potential changes to estate tax law. The likely extension of favorable tax policies, including the high estate tax exemption, will continue to impact estate planning strategies, allowing families to maximize wealth transfer while minimizing tax exposure. However, with potential changes to the broader tax structure, it is wise to consult with experts to navigate these evolving opportunities.

For personalized legal advice and support with choosing the estate planning strategy that best meets your needs, please contact the skilled attorneys at Lowthorp Richards today by dialing (805) 981-8555 or completing our convenient online contact form. Our legal practitioners are deeply rooted in the California Tri-Counties region, serving Ventura, Santa Barbara, and San Luis Obispo.

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

Cristian R. Arrieta, Lowthorp Richards McMillan Miller & Templeman, A Professional Corporation, 300 E. Esplanade Drive Suite 850, Oxnard, CA 93036