Clinton’s proposals would produce a top marginal transfer tax rate of over 80%! Big difference there, but both apparently agree on eliminating the basis step-up at death. So unless some rather large exemptions come with the change in tax regime, I hope your heirs can find all those little receipts you saved for whatever you bought on Earth — accountants will be busy!
Surprisingly, both Mrs. Clinton and Mr. Trump agree on doing away with the step-up in basis for inherited assets. However, they may differ on the timing of the realization of gain (Clinton at death; Trump possibly at a future disposition). It’s worth noting that in some cases, and depending upon the then-existing top capital gains tax rate, the loss of the step-up in basis for a highly appreciated asset could be more onerous than the estate transfer tax on the same asset.
Source: When It Comes to Estate Tax, Clinton and Trump Surprisingly Agree
Couple all this election uncertainty with the likelihood of minority discounts (one of the main tools we have in planning for large estates) disappearing by the end of this year due to proposed changes in section 2704 regs; and that under Clinton’s proposals you could be a large estate if you simply have a nice term life insurance policy, a house, and a 401k; plus the requirement of 30 days seasoning for a completed gift, prior to year end; a lot of families are in for a horrible surprise if they do not have basic planning in place already so they can rush to complete an appropriate tax planning gift by November 30!
I recommend you complete your basic planning prior to the election, and start thinking through these issues with an estate planning attorney right now.
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David R. Duringer, JD, LL.M, is a concealed firearm instructor and tax lawyer specializing in business and estate planning; licensed to practice law in the states of California and Washington. He is managing shareholder at Protective Law Corporation, serving Southern California from its Laguna Hills (Orange County) headquarters and satellite offices in San Diego County (Coronado and Carlsbad).
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