WHAT DO THE ELECTION RESULTS HARBOR FOR CURRENT ESTATE PLANNING

Dear Clients and Friends:

The sweeping political shift resulting from our recent elections causes a pause in advanced tax reduction planning and possibly an unwinding of some plans.  Many clients have positioned themselves to confront the possibility that estate, gift, and generation skipping tax exemptions would be reduced with a Harris-Walz administration or with a Trump victory without control of the Senate by the Democrat Party.  Even a Trump victory alone, without Republican control of Congress, would have potentially resulted in the sunsetting of Trump’s 2017 Tax Cuts and Jobs Act, resulting in approximately a 50% cut in the estate, gift, and generation skipping tax exemptions.  Given the apparent historic sweep of government control by the Republican Party, times will likely shift back to more traditional planning without the need to immediately use exemptions before the loss of them.

Many clients have pre-positioned their assets to confront a possible imminent loss of their exemptions. Those clients may wish to pause their planning for now. Other clients have implemented plans that are intended to use their current $13.61 million exemptions.  Some of these plans, using spousal lifetime access trusts (“SLATs”) and others, may be reversible- restoring exemptions and asset titles to where they were. Other clients may find it beneficial to maintain use of their exemptions, where significant growth has been removed from what will otherwise be a taxable estate.

Traditional planning will continue as it has for decades, where “fiscal cliffs” (tax law change that reduces current exemptions) do not require imminent use of one’s total exemption before it is eliminated.  Qualified personal residence trusts and family partnerships have been mainstays of family estate planning for decades and are often the first choice for those who will likely always have a taxable estate. For now, however, a pause to digest the elections and one’s circumstances is recommended before deciding on whether to preserve planning or to unwind it.

There are many considerations that will play into the decision-making process.  For those of you who have been in the middle of planning to confront the elections and the 2026 fiscal cliff caused by the sunsetting of the 2017 Tax Cuts and Jobs Act, we will be contacting you to help you assess your choices.

We are pleased to be of service!

Joe Kempe