Will Trump’s Estate Tax Plan Affect You?
After a hectic and hotly-debated election season, we now wait to see what changes President Trump’s administration will bring to the country. While many ideas have been proposed and discussed, one of the president’s biggest promises pertains to the tax code. The generalities of a new tax plan have been proposed, and as estate planning attorneys we are particularly interested in the prospective changes to the federal estate tax.
Under the new tax plan, which has fully detailed or presented to Congress, the federal estate tax would be completely eliminated. Therefore, no matter how large of an estate you leave to your heirs, they would not pay federal estate taxes on it. This might lead you to believe that your estate planning maneuvers, such as establishing a trust, were unnecessary.
However, a bill has been introduced here in California, that would reinstate the inheritance tax on a statewide level. So while your heirs might not pay federal income taxes on your estate when they inherit it, they would potentially pay state inheritance tax on the assets that make up your estate.
So, do you still need to worry about the federal estate tax or state inheritance tax?
The answer is a resounding YES. Even if the federal estate tax is repealed, your heirs could face state taxes on their inheritance. Also, keep in mind that the federal tax plan hasn’t be formally presented or passed in either the house or the senate. Furthermore, there’s no guarantee that a future president, as soon as four years from now, wouldn’t simply push to reinstate the tax.
In fact, if California does enact its own inheritance tax, and the federal tax is reinstated at a later date, your heirs could find themselves facing heavier taxation than before!
The bottom line is that while politics and tax structures change, sometimes frequently and dramatically, an estate plan is always needed. In fact, you should probably consider meeting with our estate planning attorney more frequently as these changes occur, so that we can revise and update your estate plan as needed.