Estate Planning in a Changing Political Landscape
Estate planning is essential for protecting and distributing your wealth according to your wishes. A potential shift in the White House could significantly impact your current estate planning strategies. Understanding the policies of a potential second Trump administration and its implications will be key for proactive adjustments. Because no concrete changes have been made yet, analyzing past policies is paramount to adjusting future plans.
The Estate Tax: Potential Adjustments
One of the most significant potential changes could involve the federal estate tax. The Tax Cuts and Jobs Act (TCJA) of 2017, passed during Trump’s previous term, doubled the estate tax exemption. This exemption rose from about $5.5 million per individual to $11.18 million. After adjusting for inflation, the exemption has climbed to $13.99 million in 2025.
However, this increase is set to sunset in 2026, and the exemption will return to pre-2018 levels. The new administration may push to extend or eliminate the federal estate tax altogether. If this happens, high-net-worth individuals may need to reassess their estate plans. Tax-avoidance strategies like trusts and gifting might become less critical than they are now.
As the future of the federal estate tax remains uncertain, continued monitoring of any legislative developments related to estate tax policy is important. Maintaining a high exemption level might make it necessary to reconsider complex tax-avoidance structures. An increase in estate tax rates could make gifting strategies or the use of irrevocable trusts much more attractive before any changes take effect.
Gifting Strategies and Estate Tax Exemptions
Because lifetime gift and estate tax exemptions are closely linked, any changes to the estate tax could affect your existing gifting plans. The TCJA allowed individuals to gift substantial assets without incurring gift taxes. Should Trump maintain the current exemption levels or eliminate the estate tax, gifting may become less of a priority for many families. If exemption levels decrease or if Democrats regain control of Congress and push for increases, individuals may want to take advantage of gifting before new laws take effect.
To prepare, consider making larger gifts now to solidify current exemption levels. You can also use annual gift exclusions, which is $19,000 per recipient in 2025, to help minimize future estate tax liability. Working with an estate planning attorney is an essential step in reassessing trust structures and gifting schedules.
Step-Up Basis and Capital Gains
Another area of discussion regarding tax policy is the step-up basis rule. This rule allows inherited assets to be valued at their fair market value upon the owner’s death. No changes were made to this rule during the president’s first term, but discussions surrounding capital gains taxation could resurface.
If Trump pursues capital gains tax cuts or maintains the step-up in basis, holding appreciated assets rather than gifting them during your lifetime may be more advantageous. Should there be shifts in capital gains taxation, however, proactive asset selling or restructuring may be needed.
Ensuring you’re prepared means staying informed about any potential changes to the step-up in basis and capital gains tax. Then you can consider tailoring the timing of asset sales or transfers based on likely tax changes. A financial advisor or tax professional will also be able to determine the best way to minimize your capital gains liabilities.
The Role of Trusts in Estate Planning
Many estate planning strategies use various types of trusts, such as grantor retained annuity trusts (GRATs), irrevocable life insurance trusts (ILITs), and dynasty trusts. Their relevance may change depending on the new administration’s tax policies. Simpler estate plans may be viable if estate tax exemptions remain high or if tax burdens decrease.
Conversely, if exemptions drop or there are restrictions on dynasty trusts, more advanced strategies may be needed to protect generational wealth. If your estate plan utilizes trusts, make sure they align with changing tax laws. Setting up irrevocable trusts prior to the implementation of potential restrictions is also helpful, given their difficult-to-change nature. Life insurance strategies could also provide liquidity for estate tax obligations.
State-Level Taxes and Estate Planning
While federal estate tax laws are often the focus of discussion, it is crucial to consider state-level estate and inheritance taxes as well. Some states impose their own estate taxes with significantly lower exemption limits than the federal government. If federal estate tax laws become more favorable, there could be an increase in wealth migration from states with higher estate tax burdens.
Start by reviewing state-level estate tax laws and exploring potential migration options. A tax professional can also help you develop strategies that can minimize your state-level tax exposure. Another option is to relocate to a state without estate or inheritance taxes—though this might not be a practical action for everyone.
Retirement Accounts and Estate Planning
Changes to estate planning laws may also affect retirement account strategies. Under the SECURE Act of 2019, most non-spouse beneficiaries must withdraw inherited retirement account funds within 10 years, potentially accelerating tax liabilities. Further reforms to retirement tax structures could influence how individuals plan their estate distributions.
Reviewing all the beneficiary designations listed on your retirement accounts is crucial. Explore Roth conversions to help minimize tax burdens on heirs. You may also want to consider charitable remainder trusts or other tools for tax-efficient retirement asset transfers.
Conclusion: Planning for the Future
Estate planning always requires foresight, and a potential second Trump administration introduces new considerations. Tax policy shifts, regulatory changes, and general economic factors will all influence the best strategies for wealth preservation. Consulting with estate planning professionals and staying informed about any legislative developments are essential to making informed financial decisions.
By proactively adjusting estate plans in response to any changing policies, individuals and families can protect and distribute wealth according to their wishes, no matter the shifts in the political landscape.
