Donald Trump vowed to eliminate the estate tax during his presidential campaign, calling the 100-year-old tax “a disaster” and “a horrible weapon that has destroyed many families.”
If there are such families, the number is likely small, since very few Americans pay an estate tax. Last year only 4,918 estates owed money under the law, according to the Internal Revenue Service. That’s because anyone with an estate worth less than $5.34 million, or $10.68 million for a couple, is exempt.
With Trump soon to take office, trust and estate lawyers who help rich clients minimize or avoid estate taxes don’t appear panicked that a revenue stream for their practices is about to dry up. In fact, most anticipate being busier than ever.
“Even if the estate tax is repealed and nothing is put in its place or the Trump plan is put in, there will be a stampede of work to do,” said Henry Liebowitz, a partner in Proskauer Rose’s private client services department. Change of any kind means that elaborate plans and documents will have to be revised, he pointed out.
“There will always be taxes on high-net-worth individuals,” said Carol Harrington, the global head of McDermott, Will & Emery’s private client practice. “We will adjust to deal with whatever taxes are placed on them.”
T&E lawyers do a lot of planning for clients that has nothing to do with taxes, Harrington added. The one thing that might temporarily depress work in the T&E bar is uncertainty, she said, as people put off planning to see what happens.
Under Trump’s plan, the very wealthy might still pay significant taxes upon death, even with the elimination of the estate tax. Property held by the decedent that has appreciated, such as stocks and real estate, would be treated as if it were sold for fair market value and would be taxed at the capital gains rate. (This follows the Canadian system, in which a person’s death triggers a capital gains tax on appreciated property.) But the first $5 million of gain ($10 million for a married couple) would be exempt from tax.
(Related: 9 Ways to Save on Taxes in Retirement)
Trump’s plan doesn’t address the gift tax, which is an important element of estate planning.
End of an Era?