A new presidential administration can bring sweeping changes in the tax codes, new rules for how wealth is taxed and a litany of other legal and regulatory changes. Your clients may be feeling a bit of anxiety right now about their financial futures, and they are depending on you, their trusted advisor, to be on top of any upcoming changes so they can minimize risk and exploit opportunities. We, too, are watching carefully, and in the weeks and months ahead, we’ll be sharing the latest updates and information you need 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 tax, financial and estate plans) will go a long way toward building trust and setting your clients at ease.
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.
- Congressional Republicans have their own agendas regarding taxes, which will probably cause some give-and-take as the final proposals take shape.
Donald Trump’s proposals
Donald Trump has proposed across-the-board reforms in the tax codes, and while he promises to close 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:
- Lowering income tax rates across the board, including significant raises to the standard deductions
- Reducing the number of individual income tax brackets from seven to three, with a maximum tax rate of 33 percent (down from 39.6 percent today)
- Reducing the business tax rate from 35 percent to 15 percent
- Eliminating the estate tax
Remember that any change to the tax laws requires Congressional approval and won’t happen automatically. In spite of Republicans being in control of the Presidency and Congress, there will still be negotiation and compromise reflected in the “final” tax law that comes out of Washington. And remember, the rules are only “final” until the government decides to change them.
Recommendations, 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-in or something else entirely. We’ll have to wait and see.
- Stress the continued need for smart estate planning. Although taxes have long had top billing in communications about estate planning, the real reasons for planning are present, no matter who is in the White House and Congress. This includes planning for medical or financial decisions during incapacity, directing your financial legacy to your intended beneficiaries, asset protection and more.
- Stay tuned for updates. As tax reform starts being fleshed out in Washington and ultimately enacted, we will provide recommendations on how to advise your clients.
What to do in the meantime
While we wait for Inauguration Day, there’s one big thing to focus on to provide the best service to your clients: Begin scheduling reviews now.
Between now and when President-elect Trump becomes President Trump, your clients should avail themselves of our services to determine how to make the most of existing rules before they are (likely) changed, and how to adapt to any changes once they occur. Again, the best way to calm anxiety in your clients is by taking a proactive stance.
Reach out now to recommend a review of your clients’ current financial and estate plan, if not by the end of the year, then certainly within the first quarter of 2017.
Change doesn’t have to be a negative. By being proactive and adapting, 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 financial advisor, you have the ability to lead your clients toward financial growth, even during the uncertainty that naturally comes with the change of government.
