Trump has promised "massive" tax cuts, but his plan would cut revenues by $6.2 trillion in 10 years. (Photo: AP)

Adrienne Penta says that during the current interregnum before Donald Trump is sworn in as president, “there’s an unprecedented level of uncertainty on tax reform.” So what is the Brown Brothers Harriman tax and estate planning expert telling clients? “Take a deep breath and stay calm; don’t undo what we’ve done” in your client’s financial plan, she advises.

While joking that her “crystal ball is in the shop,” Penta said in an early December interview that it’s “not a foregone conclusion” that the federal estate tax, for instance, will be permanently repealed during a Trump administration, despite his explicit campaign promise to do so and a Congress controlled by Republicans.

Trump’s Contract With the American Voter promises “massive tax reduction and simplification,” though Penta cites an analysis by the Tax Policy Center projecting that Trump’s overall tax plan would cut federal revenues by $6.2 trillion over the next decade, and unless “accompanied by very large spending cuts, it could increase the national debt by nearly 80%” of GDP by 2036.

While campaigning, Trump first promised in an interview with The Washington Post to “get rid of the $19 trillion” national debt “fairly quickly,” perhaps within 8 to 10 years. Later in his campaign, however, Trump said that while eliminating the national debt is important and “you could pay off a percentage” of the debt in that time, he told Fortune that “the most important thing is to make sure the economy stays strong.”

So why isn’t a permanent estate tax repeal likely? For one thing, Penta, executive director of the Center for Women & Wealth at Brown Brothers Harriman, says that full-blown repeal would require a supermajority in the Senate, recalling that “in 2006, George Bush couldn’t get the permanent repeal.” However, Boston-based Penta believes a temporary repeal could be achieved, “for some period less than 10 years.” So for planning purposes, such a repeal would “only be relevant if you plan to die in the next 10 years,” she said.

Of course, when it comes to estate planning (and financial planning overall), Penta pointed out that while “we’re always dealing with a level of uncertainty” since “we don’t know when they [clients] are going to die,” right now “there’s much less information available than we’ve had with any president-elect.”

One of the unanswered questions from the Trump camp: Considering the amount of revenue raised for the Treasury from the federal estate tax, “what he would replace the estate tax with? What does he intend?”

One hint comes from the Trump Plan on taxes, found on candidate Trump’s website, which includes a vow to “repeal the death tax, but capital gains held until death and valued over $10 million will be subject to tax to exempt small businesses and family farms.” That suggests to Penta that the administration will propose a “carryover basis capital-gains tax regime” rather than the current estate tax structure.

As for Trump’s tax policies, his contract says that “The largest tax reductions are for the middle class. A middle-class family with two children will get a 35% tax cut. The current number of brackets will be reduced from seven to three, and tax forms will likewise be greatly simplified.” In addition, the Trump Plan on taxes says “the existing capital gains rate structure (maximum rate of 20%)” will be retained, “carried interest will be taxed as ordinary income,” and both the 3.8% Affordable Care Act surtax on investment income and the alternative minimum tax “will be repealed.” The plan calls for an increase in the standard deduction for joint filers to $30,000, from $12,600; “personal exemptions will be eliminated,” as will the “head-of-household filing status”; and itemized deductions will be capped at $200,000 for married joint filers.

The plan presents “a lot of promises and broad sweeping proposals on cutting income tax rates,” but Penta says “it’s more complicated to implement [those changes] than to make those proposals.” Thus the big question for Penta: “What will he prioritize before going to Congress?”

With those caveats, Penta listed some planning decisions that clients and their advisors might consider. For those clients planning on making “a big charitable gift” some time over the next few years, Trump’s proposal to cap deductions at $200,000 for joint filers (ostensibly including charitable giving) means it’s “probably better to do so in 2016 than to wait; this might be the year to do it.”

On the income side of the personal ledger, since income tax rates might come down, “it could make sense to defer income until next year” for those clients who have the flexibility to do so. However, eliminating the AMT might mean higher taxes for some filers.

That point about the changes in the tax code that ‘might’ happen under a Trump presidency brings Penta back to one of her original arguments: The need for planning, and the need to stay in touch with clients. “There are always doing to be good reasons to do planning,” she says, especially at year end, to talk to clients about “whether they have new assets or grandchildren” that might lead to a change in an estate plan or gifting. As for the uncertainty over tax reform, she argues that it “shouldn’t stop us from communicating with clients about estate tax planning.”

See these articles by Adrienne Penta on ThinkAdvisor: