The 2016 US presidential election has attracted widespread and in-depth attention mostly for its rhetoric, personalities, and political theater, with actual political issues taking more of a backseat. And while we are and will be hearing a lot in the media on the candidates’ positions and statements on issues such as immigration, national security, and civil rights, whoever ends up occupying the Oval Office can shape policy in a way that will potentially have a significant impact on your estate planning needs. Here are a few ways that the major candidates differ on important issues affecting your estate planning goals and needs.
The Estate Tax
The current estate tax rate is 40%, although this only applies to estates valued at $5.45 million. Senator Clinton’s stated position is to lower the exemption on the estate state down from $5.45 million to $3.5 million, meaning more estates will be subject to the tax, and she also plans to raise the estate tax rate to 45%. Donald Trump plans to eliminate the estate tax altogether.
The Gift Tax
One way wealthy individuals attempt to avoid the estate tax is through giving gifts to family members during their lives, but such gifts are subject to the gift tax. The current gift tax applies to gifts over $14,000 to any donor during a tax year. Senator Clinton would implement a $1 million lifetime exclusion for gift taxes. As with the estate tax, Trump would repeal the gift tax altogether.
Capital Gains Taxes
Continuing a trend here, Donald Trump would eliminate the tax on individual capital gains profits altogether. Senator Clinton’s plan would largely keep the current system intact while adding a “medium-term capital gains tax” (applying to those investments held for between one and six years) raising the tax rate for those investments from 24% to 39.6%.
Donald Trump’s current ordinary income taxation plan is to lower the top income taxation rate from 39.6% to 25%. Currently, 25% is the top tax rate paid by single filers with taxable income between $37,650 to $91,150 a year, with increases to 28% at $91,150, 33% at 190,150, 35% at $413,350, and 39.6% at $415,050. Trump’s top tax rate of 25% would apply to single earners making $150,000 or more. Senator Clinton’s tax plan would keep the current rates while adding a 4% additional tax for earners making $5 million a year or more.
Don’t Wait Until November to Assess Your Estate Planning Needs
The future is uncertain as to the outcome of the presidential election, and the implementation of any changes to the current taxation system will require complicated maneuvering with Congress. But it is good to keep in mind that estate planning is not a fixed, stagnant practice, but rather an approach that changes constantly based on the economy and legal framework.
Regardless of what happens this November, it is always time to make sure that your estate planning goals are updated to meet your current economic and financial climate, and that you have the estate planning vehicles in place to meet those goals. For help with all of your estate planning needs, schedule a consultation with Pasadena estate planning attorney Christopher Johnson today.