Is there tax reform in the pipeline?
President-elect Donald Trump promised during his campaign that he would repeal the death taxes, as in change the laws around what people must pay out of their estates when they pass away. Specifically, candidate Trump promised to repeal the death taxes.
Right now, on the Federal level, the IRS will tax estates of single individuals which exceed $5.45 million (there are presently no estate taxes in California). As you can imagine, this tends to affect a small portion of the population – still, many individuals, even those that are not subject to these so-called death taxes, are vehemently against them. This disdain is probably because people work their entire lives to save up money, pay income taxes as they earn it, and then pay taxes again when they die because they didn’t spend it. It’s double taxation! It’s punitive! Mr. Trump thinks less tax will result in more economic growth which will make America Great Again. https://www.greatagain.gov/policy/tax-reformeconomic-vision.html
Why does this matter to you?
If you are thinking about doing some advanced planning to minimize your death taxes, you might want to wait and see whether you need to spend any more money avoiding a tax which is not going to exist anymore. That’s right, the smart move right now is to do nothing (or at least maintain the status quo). This is because we still do not know what changes are going to be made, or even whether the proposed changes can be accomplished. As you know, the President does not pass laws – despite what people in the media tend to suggest. Thus, if a change in the IRS tax code is to be made, it will come from our legislature. With 54 Republican Senators available to vote, and 45 Democratic Senators, there is not enough to avoid a filibuster if Democrats do not approve the change. If a change is in the pipeline, then there is still a lot of detail that needs to be fleshed out, the exact ramifications of which are still uncertain.
Many fear that if death taxes are repealed, then charitable giving will go down. This is because one of the reasons why people give to charities at death is to re-direct money which would have gone to the IRS to a charity of the decedent’s choosing. Charitable deductions reduce the size of the estate and could eliminate death taxes entirely. Without death taxes, some believe that the motive to give to charities will be eliminated entirely. Merrill A. Hanson thinks that this fear is probably overstated.
In the meantime, if you are a high net worth senior, stay healthy and stay alive. It may be a couple of years before changes are made, but stick around to see what’s going to happen. You cannot help but wonder if there will be anyone out there lingering in a coma until things become more certain.
Featured image from https://www.greatagain.gov/policy/tax-reformeconomic-vision.html (retrieved 11/22/2016).
Merrill A. Hanson
Law Office of Merrill A. Hanson
180 N. Glendora Ave., Ste. 201
Glendora, CA 91741
Originally Published November 22, 2016
This page is not intended to convey legal advice. You should contact an attorney for your specific situation.