We expect, and often want, changes when a new president takes office. However, the pre-election estate and gift tax proposals from each of the candidates are so different that families of substantial wealth, and their advisors, should prepare now for either set of possible changes.

Hillary Clinton has proposed reducing the current, combined estate and gift-tax exemption of $5.5 million, adjusted for inflation, to $1 million for gift tax; and reducing the estate-tax exemption to $3.5 million, also eliminating the inflation adjustments.

Clinton also has proposed raising the estate and gift tax rate from 40 percent to 45 percent. Many people believe she will ultimately include some of the Obama Green Book proposed tax changes, which would restrict the use and tax benefits of other estate and gift tax-planning techniques, such as grantor trusts and GRATS.


Donald Trump, meanwhile, has proposed eliminating all estate and gift taxes. Trump’s proposal would eliminate the need for tax-savings benefits currently achieved by the use of irrevocable trusts, grantor trusts, GRATS and family limited partnerships.

However, there will still be other valid nontax reasons, such as asset protection, divorce protection and/or bankruptcy protection, for wealthy families to use trusts and limited partnerships as vehicles to hold family assets.

Regardless of which candidate wins the election, we can expect his or her proposals to change our current estate-tax regime.

Considerations when planning for an uncertain future:

  • Planning should include nontax-savings benefits for families, such as asset protection.
  • Planning should also be flexible, to accommodate future changes to tax law. This could include broad classes of trust beneficiaries and the appointment of trust protectors with the power to change documents (decanting), especially for irrevocable trusts.

The latter would include powers of substitution so assets could be swapped, allowing someone to make loans to the trust without adequate security, etc.

Regardless of which candidate wins the election, we can expect his or her proposals to change our current estate-tax regime, even though there are no assurances that either candidate’s proposals will ultimately be enacted.

Other estate-planning changes expected during 2017 include the finalization of recently released proposed regulations, which could effectively eliminate the use of valuation discounts for family-owned businesses and investment entities, with respect to lack of marketability and minority interests.

These proposed regulations will disregard restrictions on control, marketability and liquidation clauses commonly used in limited partnership agreements. The effective date for these proposed regulations will be 30 days after the final regulations are issued.

While future tax-law changes are uncertain, making any planning for them challenging, that is exactly what families with substantial wealth should be doing.

This article is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. To the extent anything herein could be construed as tax advice, such advice is not intended to be used and cannot be used to avoid penalties under the Internal Revenue Code, or to promote, market or recommend to another person any tax-related matter. This information is general in nature and may be affected by changes in law or in the interpretation of such laws. The reader is advised to contact a professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.