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Risks And Opportunities For Your Clients Under President-Elect Trump

by Phil Levin, Esq. on December 22nd, 2016

jpeg-2A new Presidential administration can bring sweeping changes in the tax code, new rules for how wealth is taxed, and a litany of other legal and regulatory changes. As a result of Donald Trump’s victory on November 8th, combined with Republican majorities in the House and Senate, we expect that there will be significant changes starting on or soon after January 20, 2017, when President-elect Trump takes office.

Some of your clients may be feeling a bit anxious right now about their financial future, and they are depending on you to be on top of any upcoming changes so they can minimize risk to their portfolios as well as capitalize on potential opportunities for growth. We are also watching the political scene very carefully, and in the weeks and months ahead, we will share with you the latest updates and information you need to know in order to help your clients make informed decisions about their estate plans.

In the meantime, taking a proactive approach with your clients in light of the election, including a review of their current financial, tax, and estate plans, will go a long way toward building trust and bringing peace of mind to your clients.

We’ll go into more detail momentarily, but here’s a quick overview of what we know so far:

  • The Trump administration wants to lower taxes, including a possible repeal of the estate tax.
  • But, Congressional Republicans have their own agendas regarding taxes, which will probably cause some give-and-take as the final proposals take shape.

Let’s take a closer look at each of these factors.

Donald Trump’s Proposals –

Donald Trump has proposed across-the-board reforms in the tax code, and while he promises to close up some loopholes, the general trajectory of his proposals is toward lowering taxes overall.

You can find the details of his tax plan on his website, but the most pertinent points are as follows:

  • Lowering income tax rates across the board, including significant raises to the standard deductions
  • Reducing the number of individual income tax brackets from 7 to 3, with a maximum tax rate of 33% (down from 39.6% today)
  • Reducing the business tax rate from 35% to 15%
  • Eliminating the federal estate tax

Please note that any change to tax laws requires Congressional approval and will not happen automatically. Although Republicans will soon be in control of both the Presidency and Congress, there will still be negotiations and compromises reflected in the “final” tax laws that are decided on Capital Hill. And remember, the rules are only “final” or “permanent” until the government decides to change them in the future.

Strategies to consider, assuming President-elect Trump’s agenda is put into law:

  • Recommend Cautious Optimism. The elimination of the estate tax in particular is likely to be welcome news to your higher net worth clients, but the proposal may be subject to opposition or compromise in Congress. This compromise could range from a “sunset” provision to gradual phase-out of the federal estate tax, as well as the imposition of carry-over basis laws for assets owned by a decedent’s estate, or something else entirely. We will need to wait and see.
  • Stress the Continued Need for Smart Estate Planning. Although taxes have long received top billing in discussions with clients about wealth transfer planning, there are a tremendous number of non-tax related reasons to ensure that you and your clients have an up-to-date estate plan, regardless of who is in the White House and Congress, and what new legislation is singed into law. This includes planning to make sure assets distribute to beneficiaries in a manner which is protected from the potential claims of creditors, predators, and divorcing spouses of intended beneficiaries, as well as making sure that financial and health-care decisions during an illness, injury, or incapacity are made by appropriate individuals who are capable and financially responsible.
  • Stay Tuned for Updates. Political winds often blow in many different directions. Therefore, as tax reform starts being fleshed out in Washington and ultimately enacted, we will continue to provide you with further recommendations on how to best advise your clients.

What to do in the Meantime

While we wait for Inauguration Day, we would urge you to focus on providing responsive service to your clients by scheduling reviews now.

Between now and when President-elect Trump becomes President Trump, your clients should avail themselves of both financial and estate planning services to determine how to make the most of existing rules before they are changed, and how to adapt to any changes once they are enacted into law. Again, we believe that the best method to calm any anxiety facing your clients is to take a proactive approach. Reach out now to recommend a review of your clients’ current financial and estate plans, if not by the end of the year, then certainly during the first quarter of 2017.

No one knows exactly what the future holds, but it is fair to say that significant changes to income taxes, estate taxes, and the overall regulatory environment are coming. Change is really the only certainty in life. The good news is that change does not have to be a negative. By being proactive and adapting to changes, you can continue to help your clients build their wealth while growing your own business. As noted author and leadership expert John C. Maxwell reminds us: “Change is inevitable. Growth is optional.” As a trusted advisor, you have the ability to lead your clients toward financial growth, even during the uncertainty that naturally comes with the change of government.

If you are interested in learning more about the application of well accepted trust and estate planning strategies to help your clients protect their assets, and maximize the transfer of wealth to their families, please call The Levin Law Firm to arrange a consultation with attorney Philip Levin, Esq., at (610) 977-2443.

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