How Trump’s Presidency May Affect Taxes and Estate Planning

As of the time of this writing, neither Nevada nor Arizona has been called for either candidate. However, former President Trump has won well more than 270 electoral votes and earned back the White House. This led, in part, to a surge in the financial markets yesterday with investors and corporations having economic optimism. Why? Given Trump’s prior presidential term and his more recent campaign promises, there is an expectation of lower taxes, higher margins, and more market-friendly policies.

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Federal Taxes

Death and taxes are still certainties in life despite more recent campaign comments by Trump, floating the idea of eliminating the federal income tax. When questioned by Joe Rogan, on The Joe Rogan Experience, regarding the replacement of the federal income tax with tariffs, Trump responded, “Yeah, sure, why not?” While there is no question that the Internal Revenue Code and the related government agency—Internal Revenue Service—could use some overhaul, it is unlikely that the federal tax system put in place by the Sixteenth Amendment will be completely dismantled.

More likely, the second Trump administration will focus on extending the provisions of the 2017 Tax Cuts and Jobs Act (“TCJA”). The TCJA implemented many notable changes, including: increasing the standard deduction, expanding the Child Tax Credit, decreasing the corporate tax rate to 21.0%, and generally decreasing the individual income tax rates (39.6% to 37.0%, 33.0% to 32.0%, 28.0% to 24.0%, 25.0% to 22.0%, and 15.0% to 12.0%). However, many of the TCJA tax changes are currently set to sunset at the end of 2025, barring an act of Congress.

Trump’s campaign platform included a focus on making permanent the tax provisions of the TCJA.[1] We will wait and see how this new administration and Congress will work towards a more permanent solution; otherwise, taxpayers could expect an increase in their tax bill after 2025. Additionally, Trump’s campaign has offered other federal tax proposals, including: eliminating taxes on tips and Social Security benefits and further lowering the corporate tax rate from 21.0% to 15.0%.

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Estate Planning

Generally speaking, estate planning is a matter of state law, so a presidential election should not have marked effects on general estate planning strategies and techniques. That is, you can feel comfortable that your use of a revocable living trust, pour-over will, buy-sell agreement, etc. is still relevant and workable.

Nevertheless, the TCJA and potential tax changes can affect your estate planning. The TCJA substantially raised the estate tax exemption for taxpayers. Currently, the estate tax exemption in 2024 is $13.61 million per individual ($27.22 million for married couples). That estate tax threshold places the vast majority of American estates in the “I don’t need to worry about federal estate taxes” category. However, should the TCJA sunset at the end of 2025, the estate tax exemption would drop to pre-TCJA amounts (indexed for inflation), putting it around $6 million. Again, this new administration’s concerted effort to make the TCJA changes permanent will more than likely keep the higher estate tax exemptions in place, which will continue to increase each year.

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Conclusion

Any comprehensive planning should address both federal tax planning and estate planning. As the federal administrations transition over the next few months, it will be interesting to see the initial legislative priorities. We will review any federal tax changes, as they move through Congress and beyond. As a practical matter, you should seek professional advice to appropriately deal with your estate and your federal tax obligations in this changing environment.

Contact Montgomery Legal today to discuss your federal income taxes and estate planning. Schedule a Consultation or call (214) 432-6100.

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[1] 2024GOP Platform – Make America Great Again!, available at https://rncplatform.donaldjtrump.com/?_gl=1*1ovc26m*_gcl_au*MzU0NzIyODM1LjE3MzEwMTAxNDQ.&_ga=2.58642986.1698642686.1731010144-1370805258.1731010144.

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