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Post Election Gift Planning

In light of the election results, we are making some initial forays into the possible results to bring our clients the very best estate and tax planning advice.

Under Donald Trump, he would propose to eliminate estate taxes (presumably that would mean gift and generation slipping taxes also), but with a carryover basis for assets in excess of 10 million (in other words, only a step up in cost basis on the first 10 million of inherited wealth, with the tax bite on the appreciation only to come when the appreciated assets are later sold).

It seems to me that what this appears to mean is that (absent special circumstances)anyone contemplating making a taxable gift (particularly if the estate/gift tax exemption has been used up) would be wise to refrain from doing so until we see what new laws are passed. If the Trump proposal is implemented, there would appear to be no need to make lifetime gifts if the sole purpose is to reduce the donor’s taxable estate or otherwise exclude future appreciation from the taxable estate. As New Jersey is phasing out its own estate tax (2 million exemption in 2017; eliminated by 1/1/18), the motivation to make lifetime gifts to eliminate the NJ estate tax (since lifetime gifts are not brought back into the NJ taxable estate) would also seem to be eliminated. For New York, things are a bit different, since it will still have an estate tax (although since NY’s taxable threshold is now 4.187 million, increasing to 5 million on 4/1/17 and then supposedly increasing to an amount equal to the Federal exemption- currently 5.45 million- on 1/1/19, unless NY changes its estate tax laws, fixing s set exemption amount on 1/1/19, if the Federal estate tax is eliminated, so too would be the New York estate tax, something which NY is unlikely to allow). Obviously, for residents of states such as Florida which does not have an estate tax, state estate tax issues would appear to be irrelevant.

Bottom line: again, barring special circumstances (i.e., terminal illness, a need to avoid state estate taxes, but only if the loss of a basis step up is overshadowed by state estate tax savings) it would appear to be advisable at this time to hold off making taxable gifts (particularly those which would require payment now of a Federal estate tax because the exemption has been fully utilized) until we see what the next Congress will do.

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