It’s Almost Election Time: How this could affect your estate plan and some proactive solutions

In the context of the current election, it’s important to proactively plan for potential shifts in tax laws and regulations that could significantly impact your estate planning. Elections often result in changes to fiscal policies, tax exemptions, and regulations that directly affect estate planning strategies. Here are some key areas you should be focusing on right now:

1.   Estate and Gift Tax Exemptions

• Federal estate and gift tax exemptions are a significant area to watch. As of 2024, the exemption is historically high ($13.61 million per individual), but this amount could be lowered, especially if there’s a shift in political power toward more tax-heavy policies. Even now, unless Congress acts, this amount is scheduled to expire on December 31, 2025, to about $6-7 million range per person beginning on January 1, 2026.
• Proactive Strategy: Consider making large gifts or transferring assets now under the current high exemptions. You can use strategies like spousal lifetime access trusts (SLATs), irrevocable children’s trusts, or dynasty trusts to lock in the current exemption for your heirs.

2.   Charitable Giving and Deductions

• Charitable giving could be impacted by changes to deductions or incentives. Certain platforms propose reducing the deductions available to high-income earners, which could lessen the tax benefits of charitable contributions.
• Proactive Strategy: If you’re planning to make significant charitable gifts, it may be better to do so before any deduction limits are imposed. Setting up a donor-advised fund (DAF) or charitable remainder trust (CRT) now could lock in current tax benefits.

3.   Trust and Estate Structures

• Depending on your estate size and family situation, you may want to reassess the types of trusts or estate structures you use. A revocable trust provides flexibility and avoids probate, but tax-driven structures like irrevocable trusts (e.g., Grantor Retained Annuity Trusts (GRATs) or Qualified Personal Residence Trusts (QPRTs)) may need adjustment based on new rules or limits.
• Proactive Strategy: If you have existing trusts, it’s worth reviewing whether these are still effective given potential policy changes.

4.   Review Your Estate Plan Regularly

• With elections comes uncertainty, and legislation can move quickly after new officials take office. It’s crucial to keep your estate plan flexible and updated regularly to reflect changing laws.
• Proactive Strategy: Work closely with your team (ie financial advisors, accountants, and your estate planning attorney) to ensure your plan is ready to adapt to any changes resulting from the election. Regularly reviewing and updating your will, trusts, and overall strategy is key.

Being proactive with your estate planning ahead of a current election can help mitigate potential negative impacts from policy changes while maximizing the use of current tax benefits and exemptions. It’s a good idea to have a firm understanding of your plan so that you can be prepared for any shifts that come after the election.

 

About the Author

Hillary E. Mims
Paralegal