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November 15, 2016
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The recent presidential election cast a shadow of uncertainty over estate tax planning. President-elect Donald Trump’s platform includes a repeal of the federal estate tax and other proposals regarding our tax code. With these issues in mind, the McNees Estate Planning group wanted to provide its thoughts on planning for this year and the near future.

We believe that the legislative priorities of the Trump presidency will be (1) immigration reform, (2) filling the vacant Supreme Court seat, (3) trade deals, and (4) repealing the Affordable Care Act. Each of these initiatives will take time and resources but should be legislative priorities given the appeal of these issues to his supporters.

A repeal of the estate tax, we believe, will be part of comprehensive tax reform legislation. This legislation will take a long time to craft, will require significant resources of the executive and legislative branches, and will be subjected to intensive lobbying efforts. There are also few specifics in Trump’s platform as to how revenue lost through tax cuts will be offset through economic growth while at the same time proposing few cuts to entitlement programs and large infrastructure spending increases.

With regard to the proposed IRS regulations that will greatly limit valuation discounts for intra-family estate planning transactions, the Trump platform provides that there will be a “temporary moratorium on new agency regulations.” It is not clear how long the moratorium will last or whether pending regulations would be subject to the moratorium.

The bottom line is that even with a Republican-controlled Congress it is difficult to predict whether the estate tax will be repealed. There is a risk that tax reform legislation will be delayed over the next two Congressional sessions and that the Senate, which is currently 52 Republicans and 48 Democrats, switches to Democratic control in 2018. The possibility of a Democratic Senate after the mid-term election seems unlikely in today’s political climate, but those winds could shift over the next two years. And, even if the Republicans pick up seats in the Senate, it is doubtful they will pick up the eight seats needed to prevent a filibuster.

Our thoughts on planning:

• It is impossible to give definitive advice given the uncertainty of the fate of the federal estate tax.
• Clients should consider non-tax planning aspects of their estate plan, such as the creditor protection offered by trusts and the control a trust can give over an inheritance.
• Lifetime planning still avoids the Pennsylvania inheritance tax, which can be important with valuable, illiquid assets.
• Every client’s situation is unique. Each client should assess his or her situation based on (1) the particular circumstances of your family and heirs, (2) appetite for risk (that is, do you want to risk missing a planning opportunity if the estate tax is not repealed?), and (3) the time constraints and stress associated with year-end planning.

If you have any questions about your plan, please contact any member of the McNees Estate Planning Group.