Lawyers for Wealthy Await Trump’s Estate Tax Plan

If the estate tax were eliminated, it would cost the government $240 billion in lost revenue over 10 years, according to the Tax Foundation, a nonpartisan tax research group. Last year, $17.1 billion was owed under estate tax returns filed. While that represents less than one half of 1 percent of the country’s overall budget, it’s money that could fund a lot of programs. The estate tax did lapse in one year, 2010, but was quickly reinstated.

All those interviewed agree that it’s too soon to predict the future of the estate and gift taxes. Joshua Rubenstein, the national head of Katten Muchin Rosenman’s trusts and estates practice and its private client services group, has been cautioning his clients not to rush to action. “I have certainly gotten a ton of calls to ask, ‘What does this mean?’” he said. “The most important thing for clients to do is not run off half-cocked and do something foolish.”

“I happen to think the odds of repealing the estate tax are extremely small,” said Rubenstein. “We’ve had an estate tax for 100 years.” (The tax was adopted in 1916 to help pay for World War I.) He added: “When push comes to shove, I suspect it will be more important to drop the corporate income tax.”

McDermott’s Harrington sounded less certain that the estate tax would survive. “Really for the first time, there’s a good probability that [Congress] will repeal the estate tax, at least for now. It certainly has been on the Republican wish list for a long time,” she said. “I think the odds have never been higher that it will be repealed.”

“The biggest unknown is if the gift tax will be repealed,” said Liebo­witz. “If it is, we’ll see trillions of dollars of assets transferred to a younger generation as soon as possible.”

Harrington said that it’s also hard to predict how the elimination of the estate tax might affect charitable giving. It could harm charities, because rich people wouldn’t need to give away money to reduce their estates to avoid estate taxes. “High-net-worth individuals might reduce charitable giving, but they will have more money [because of the absence of an estate tax], so they might give it away,” Harrington speculated. Trump’s plan could also deter giving because it would limit itemized deductions to $100,000 per person.

David Scott Sloan, who co-chairs Holland & Knight’s national private wealth practice, pointed out that the T&E bar has faced existential threats before. The number of estates subject to the tax has plummeted as the standard exemption has grown. Fifteen years ago, in 2001, the exemption was a mere $675,000 per person, compared with nearly $5.5 million today. In 1977 a total of 139,115 estate tax returns were filed, representing nearly 8 percent of all deaths that year. That figure fell to an infinitesimal 0.18 percent in 2013, according to the IRS.

“When the exemption was raised to $5 million [per person], that was supposed to kill T&E,” Sloan said. “But it didn’t.”

— Related on ThinkAdvisor:

• 9 Ways to Save on Taxes in Retirement
• Year-End Tax Planning More Urgent as GOP Policy Changes Loom
• Optimizing Clients’ Charitable Giving This Season

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