Experts broadly agree that the success of Republicans in the 2024 U.S. election makes it likelier that key provisions of the 2017 tax overhaul will be extended before they sunset at the end of 2025, including the historically high estate tax exemption.
This means that wealthy clients with significant assets earmarked to pass along to heirs can breath a little easier and take more time to enact potentially complex estate and trust planning strategies that can result in substantial tax savings across the generations.
Yet, as pointed out by Mike Kirkman, a partner and certified public accountant at Cherry Bekaert, the increased likelihood of the sunset extension is not the only factor that clients should consider in the estate planning process in late 2024 and early 2025.
To begin with, there is still a small but meaningful possibility that Democrats will retain power in the House, which could add a layer of complication to extending the tax overhaul.
"I think we need to see how the House ends up," Kirkman wrote to ThinkAdvisor via email. "If the House ends up under Democratic control, that may put some road blocks for a completely Trump-based Republican tax policy to get passed."
He added: "A Democratic controlled House would be potentially encouraged to negotiate certain tax policy proposals in order to get a package passed."
But the bigger point, given that Republicans seem to be moving steadily toward control of the full Congress, is that there are still significant reasons to do estate planning now — especially in light of the potential for the economic environment to continue to strengthen.
If the fight against inflation continues successfully and the markets continue their run-up, that would lead to a potentially substantial increase in asset values, Kirkman pointed out, including both marketable securities and private enterprises. Getting these assets out of the estate sooner rather than later could result in substantially improved outcomes.
