How the Trump Administration May Affect the Estate Tax

by Evelyn Blue, CEP

With the start of a New Year and a new President, everyone is anxious as to what tax changes the Trump administration will propose and implement. President Trump and members of Congress suggest that there will be significant tax reform that will impact not only income tax for individuals and businesses, but estates as well. The Trump Plan would repeal the estate tax; however, capital gains held until death and valued over $10 million will be subject to tax which would exclude small businesses and family farms. This repeal could impact many current estate plans.

You might remember reading or hearing that the proposed regulations under Section 2704 were released by the IRS on August 2, 2016. Section 2704 deals with valuation of interests in family-owned entities. For years, closely held businesses have been able to transfer wealth to family members using valuation discounts. As a result, business interests in corporations, partnership and LLCs could be moved from senior to junior family members at reduced tax costs. However, the IRS has proposed regulations that will significantly reduce (and or eliminate in some instances) valuation discounts for some closely-held businesses. Some of the discounts impacted are, but not limited to, minority interest, lack of marketability, fractional interest, and key person discounts.

These long awaited proposed regulations under Section 2704 have been quite controversial as one can imagine, and would affect a number of local family businesses. While these regulations have been an on-going topic of conversation for some time, the IRS is making it clear that these regulations will be permanent and mandated. The IRS received over 1,000 comments about the proposed regulations but have only been able to review a few hundred of them so far, which clearly makes us wonder if the proposed regulations will be finalized anytime soon.

Unfortunately, we do not have a crystal ball to foresee the future enacted regulations, but please know that Snyder Cohn will inform you of any significant tax changes and reform proposals that might affect you, your family and your business as soon as more information becomes available.

Also of note, the estate and gift tax exemptions have been set for 2017. Again, while there may be some changes from the new administration, please see the current amounts below for your estate planning needs:

Federal Estate Tax Exemption- $5,490,000
Federal GST Exemption – $5,490,000
Federal Annual Exclusion for Gifting – $14,000
*Maryland Estate Tax Exemption – $3,000,000
District of Columbia Estate Tax Exemption – $2,000,000

*The exemption amount will be equivalent to the Federal in 2019.

If you have any questions or concerns, please do not hesitate to call a member of the Snyder Cohn team.