The 2024 U.S. presidential election has concluded, prompting many individuals to evaluate how the political landscape may influence their financial strategies and long-term plans. One critical area of focus is estate planning, which can be significantly affected by shifts in legislation, tax policies, and the broader economic climate.
Michelangelo Mortellaro, an estate planning attorney based in Tampa, examines the potential ramifications of the recent presidential election on estate planning. He highlights key considerations that individuals should keep in mind as they navigate this evolving financial landscape.
What About Tax Changes?
On the eve of the election, during a campaign rally in Raleigh, North Carolina, president-elect Donald Trump outlined his tax plan: “My plan will massively cut taxes for workers and small businesses, and we will have no tax on tips, no tax on overtime, and no tax on Social Security benefits.”
Taxation is a key component of his agenda, and any changes in this area may have significant implications for estate planning, potentially affecting both individuals and families.
Income Taxes
Extending the 2017 Tax Cuts and Jobs Act (TCJA) is expected to provide significant tax savings for various income brackets. Individuals with annual earnings between $60,000 and $100,000 may benefit from approximately $1,000 in tax savings. Additionally, those with incomes exceeding $1,000,000 could see savings of up to $70,000.
Estate Taxes
The estate tax, commonly referred to as the “death tax,” is a federal tax applied to the transfer of an individual’s estate at the time of death. Under the Tax Cuts and Jobs Act (TCJA), the exemption threshold was established at over $12 million for individuals and approximately $24 million for married couples. For the upcoming year, the IRS has announced that the estate tax exemption will increase to $13.99 million for individuals and around $27.98 million for couples.
The TCJA expires at the end of 2025. Consequently, individuals with a net worth between $7 million (or $14 million for married couples) and the new exemption limits of $13.99 million (or $27.98 million for married couples) should be attentive to any developments regarding its potential permanence.
Keeping the Stepped-Up Basis Rule
The stepped-up basis rule allows heirs to eliminate capital gains tax on appreciated assets. This provision promotes the efficient transfer of wealth between generations and has garnered substantial backing from Republican lawmakers. As a result, it is anticipated to be a central topic in ongoing policy discussions.
What About the Economy?
The economic policies set forth by elected candidates can have a considerable impact on financial markets, which subsequently influences estate planning strategies. For example, any proposed changes to taxation may affect investment approaches, especially regarding real estate, stocks, and retirement accounts. Understanding these dynamics is crucial for effective financial management and long-term planning.
The 1031 Like-Kind Exchange provision is a tax regulation designed to assist real estate investors in deferring capital gains taxes. This provision allows investors to reinvest the proceeds from the sale of a property into similar properties without immediately incurring tax liabilities. By facilitating this reinvestment, the 1031 exchange has significantly encouraged ongoing investment in the real estate sector. Additionally, indications from the Trump administration suggest strong support for maintaining this provision.
Healthcare costs play a significant role in estate planning, especially for those in their later years. With President-elect Trump’s commitment to enhancing the Affordable Care Act, overhauling Medicare, and supporting public health reforms, the specific implications of these changes remain uncertain. However, upcoming healthcare legislation could potentially alter coverage options and influence medical expenses, affecting financial resource allocation for individuals. It is crucial to consider potential shifts in long-term care policies and medical costs when assessing your estate plan, as these factors can ultimately impact the wealth passed on to heirs.
What About Political Ramifications?
The new administration may face challenges if the House remains under Democratic control or if he has only a slim Republican majority, as bipartisan cooperation will be crucial for implementing comprehensive tax reforms. In this scenario, Trump’s proposed policies, such as making aspects of the Tax Cuts and Jobs Act (TCJA) permanent or expanding the Child Tax Credit, may require significant negotiation and compromise with opposition members.
Remember, proposals introduced before Inauguration Day often evolve, influenced by the composition of Congress and the cabinet appointments made thereafter.
Partner with an Estate Planning Attorney in Tampa
The Trump administration is anticipated to provide advantageous conditions for wealth preservation, particularly for individuals engaged in estate planning. Should the policies outlined in the Tax Cuts and Jobs Act (TCJA) become permanent, high-net-worth families could benefit from consistently elevated exemptions on estate and gift taxes.
Following the 2024 election, it is crucial to stay informed about any changes regarding taxation, inheritance laws, and economic policies, as these will significantly impact your estate planning strategies. Engaging with an Estate Planning Attorney in Tampa, such as those at Mortellaro Law, can help ensure that your estate plan adapts to the evolving political landscape. For more information, feel free to reach out to us.
