Many New Jersey residents are wondering what type of changes might come with the election of Donald Trump and the Republican party holding majorities in both the House and the Senate. Among other things, one area that could be greatly affected is estate planning. If the Republican agenda is successful, then there could be dramatic changes in related tax laws.
Trump has repeatedly indicated his intention to seek a repeal of the estate tax. While many people may think that this sounds good, the reality is that very few people are subject to the federal estate tax since the 2017 federal exclusion is nearly $5.5 million per person an $11 million for married couples. If the estate tax is repealed, it is likely that it would be replaced by changes to the capital gains system, which could potentially negatively impact a majority of people.
Under current law, the basis of capital assets that are distributed upon an owner's death is "stepped up" to the fair market value on the date of death. As such, any appreciation goes untaxed, and recipients will only have to pay capital gains tax when they sell those assets on the amount of appreciation, if any, after such date. However, one proposal would eliminate this rule and instead deem a transfer occur on the date of death. This could result in estates without sufficient liquid assets being unable to pay the resulting capital gains tax.
A repeal of the gift tax is unlikely, but other changes could occur. People may want to visit with their estate planning attorneys in order to make certain that their wills and trusts incorporate any potential changes in the law over the next four or eight years.