As president, father, and real estate magnate, President Donald Trump should give estate planning attorneys much food for thought–and that's true even in these early days of the administration. So let's consider one idea that relates to President Trump as father and real estate magnate, and another on policy writ large.
Can Trump's Personal Estate Plan Benefit Your Clients?
Let's begin by talking about the Trump Organization's unique estate-planning strategy in a lease document of Trump International Hotel in Washington, D.C.
Trump gave three of his children immediate interests in the hotel. His children hold a 7.425 percent interest each in the property, but they make zero equity contributions. Therefore, the law considers their stakes “gifts.”
Trump has to pay gift taxes on the hotel, but he’s likely saving a fortune on larger taxes in the future. If the hotel sees success, its value will appreciate, and his children’s stakes will become more valuable over time. So it's cheaper to pay the tax now, than pay based on that increased value down the road.
Perhaps this estate planning technique would be great for entrepreneurial clients who want their children to be active in the business.
And you can create an LLC to offer personal liability and asset protection, so your client can gift parts of the business to children over time, while still controlling the general interest.
Estate Planning Is Still The Wise Move
Yes, the Trump Administration and the GOP have been campaigning on changes to taxation, including estate law tax. However, as of today, there are no new estate tax laws in effect. Therefore, if you have clients who have put off some of their estate planning, waiting for changes in the law, the Trump Administration's initial forays into a new health care legislation are a good reminder: Massive changes of laws are complex, difficult and take time. And in practice, the reality of those can be much more modest than those originally proposed.
Therefore, clients shouldn't assume that estate taxes are going to vanish overnight. They should still protect assets with trusts and other tools that are already viable under the law.
If they push back, remind them that good estate planning and trusts should be regularly reviewed–not just when laws change, but when they acquire or dispose of assets, when heirs get married or divorced and so forth. So there's no reason to wait: Estate planning is a process.
And one way to further assure clients that efforts now won't go waste–you can easily update and modify estate planning documents with tools such as Wealth Docx®–programs designed to notify you of how existing plans comport with changes in the law. So you'll be ready and able to handle whatever comes your way. For more insights, call or email the WealthCounsel® team.