President-elect Donald Trump made many promises via Twitter and while stumping on the campaign trail. As the campaign wore on, there were all sorts of strange statements that even made Republicans cringe, but one that did not was Trump’s stance on estate taxes (often called death taxes by the Republicans) and gift taxes.
One of the few concrete details Trump had in his tax plan would do away with the death tax so that the wealthy and small business owners would be able to pass assets and money to their heirs. Mr. Trump’s plan would erase the current threshold of gifting $5.45 million (10.9 for married couples) tax free. Any amount above that is currently taxed about 40 percent by the federal government.
What about Massachusetts?
The Commonwealth of Massachusetts is one of the 15 states (plus District of Columbia) that also have an estate tax. If you are a resident of Massachusetts and die with more than $1 million in your taxable estate, there is a sliding tax scale between 0-16 percent. Learn more here on what rate would apply to you.
What’s it mean?
According to the Wall Street Journal, people will not have to divest money or assets or create trusts if the new president eliminates this tax. While an article in Forbes claims that Trump plans to replace the estate tax with a capitol gains tax rate levied at 20 percent at time of death, but to be paid when an appreciated asset worth $10 million or more is sold after it is inherited.
It’s premature to assume that any legislation will be passed as is by the president, particularly with Democrats still a majority in the U.S. Senate, but this elimination of the estate tax may be one of the less controversial moves by President Trump or part of a larger tax overhaul. Regardless of what happens, there is little doubt that the new administration will have a huge impact on estate planning, trusts and inheritance in the coming years.
The wise course of action will be to speak with an attorney with experience in estate planning. These experts will have a firm grasp of the changing topography of estate planning as it shifts under the new administration.