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What the 2020 Election Could Mean for Your Estate Plan

November 19, 2020 //  by Regina Slaton Schauer

The following article by Steve Harnett is a good article by one of most prominent national leaders in estate planning. I am going to start posting articles written by him often in an effort to keep all of my clients as current and educated as possible on important topics related to estate planning.  Please let me know if you find this helpful. If you find it helpful,  I will seek more information of this type to help you. If you do not find it helpful, please let me know that also so I can focus on other topics that you might find more useful! Thanks!   Regina   

November 17, 2020 by Steve Hartnett

How did the 2020 elections shape the political landscape and what does that changed landscape mean for your estate plan? First, at the top of the ticket, it appears Joe Biden and Kamala Harris are the new President-Elect and Vice-President Elect, with an apparent 306 electoral votes to Donald Trump and Mike Pence’s apparent 232 electoral votes. Democrats retained control of the House of Representatives, although with a narrower majority.

The Senate is a more complicated matter. Republicans control 50 seats and Democrats control 48 seats in the Senate. Both Senate seats in Georgia will be up for runoff elections on January 5, 2021. There are Republican incumbents in both seats and the Democrats have an uphill battle to defeat them in runoff elections. However, if Democrats prevail in both runoff elections, the Senate would be tied with 50 Republicans and 50 Democrats and, beginning January 20, 2021, Vice President Kamala Harris would be the tie-breaking vote to give Democrats the majority in the Senate.

With Democrats in control of the Presidency, the Senate, and the House, they might be able to enact legislation similar to then-candidate Joe Biden’s Tax Plan. That plan included a reduction of the amount which could be passed free of estate tax from the current $11.58 million to $3.5 million. The Biden plan also called for increasing income tax rates and capital gains tax rates, as well as other changes.

What could this mean for you and your family? If you have assets that could be over $3.5 million by your death, this could mean you’d owe an estate tax of 40% on those assets above $3.5 million. You may be able to plan now to take advantage of the current exclusion of $11.58 million. (Note, even without Congressional action, under current law the current exclusion will be cut in half at the end of 2025.)

A possible Democrat-controlled government could change the estate tax exclusion retroactive to January 1, 2021. So, you’d need to act in 2020 to be certain to avoid a possible reduction in the exclusion. You could do this by gifting outright to your children or other beneficiaries. However, by gifting to a trust, you could protect them and the assets from creditors, divorcing spouses, and their own mismanagement. If you’re married, you could gift the assets to an irrevocable trust for your spouse’s benefit. Such trusts could distribute for the benefit of the beneficiaries under the distribution terms you’ve specified, such as for their health, education, maintenance, and support.

If you believe income tax rates will be higher in 2021, you might consider recognizing income in 2020 or deferring deductions to 2021 when they might be more valuable.

Consult your estate planning attorney soon to discuss these possible strategies and how they could be used in your situation.

Stephen C. Hartnett, J.D., LL.M.
Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com

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Regina Slaton Schauer
Regina Slaton Schauer
Estate Planning Attorney at Slaton Schauer Law Firm, PLLC
Regina Slaton Schauer, has been practicing law for 25 years and is licensed to practice in Texas and Oklahoma. In addition to doing estate planning, her background includes being a Judge for eight years, working in a district attorney’s office and running two international programs where children were brought from orphanages and placed into loving American homes.
Regina Slaton Schauer
Latest posts by Regina Slaton Schauer (see all)
  • That Giving Feeling - February 20, 2023
  • Do I Trust You? Part III - February 16, 2023
  • Do I Trust You? Part II - February 15, 2023

Category: Estate PlanningTag: Democrats, Election 2020, estate planning, Estate Planning Education, Filed Under: Estate Planning, Law Firm Software, Law Firm Systems, Law Firm Technology, Law Practice Management, Legal Education, Legal Education Tagged With: Biden, legal marketing, Practice Building Strategy, Republicans, Steve Hartnett, Trump

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