Dear Michael: We have been putting off our estate planning since the presidential election. We know, under the current laws, our estate will have to pay estate taxes as we are in excess of eleven million dollars by a good share.
Do you think estate taxes will be eliminated as promised in the election campaign? Should we just continue to wait until the tax relief agenda is passed by Congress?
– Waiting on a Solution
You could sit and wait and see what happens. There are three scenarios which we will face in the upcoming months and you’ll have to decide what you should do after hearing about them. But first of all, you’ll need a short history lesson in how the past presidents were elected.
Everybody would like to think President Obama got elected on his own merit.
However, if you remember his campaign slogan “It’s Time for a Change” was appealing to people who were unhappy with President Bush.
President Bush made many Americans feel duped by his decision to go into Afghanistan and Iraq looking for WMD’s (weapons of mass destruction) and it really made people angry when they found there was no proof of WMD’s in Iraq and we were losing troops on the battlefield – a battlefield that still rages on. Our military took out Sadaam Hussein – a dictator – but left a void for ISIS to rush into.
There’s always that middle ground in the United States which votes their hearts and minds and not their party – Democrat or Republican. Both Democrats and Republicans have a staunch base but it’s not enough to create a majority in this country without those middle of the road people.
In a way, President Obama was elected the first time due to the tactics used by President Bush, who disenchanted those in the middle. The middle voted for President Obama and he was elected. The political pendulum swung to the left.
On his second term, our country had just gone through the housing crisis, many had lost their jobs and Obama was re-elected due, in large part, to the extended job benefits offered through the administration as people were fearful due to job losses and homes underwater in mortgages.
President Obama then took this as a mandate to push through his other agendas and if Congress couldn’t get it done, he used Executive Orders to push through laws he wanted to see as a part of his legacy.
Many people took exception to that and again the middle ground swung their votes over to the Republican candidate, President Trump. So, much like Obama was elected by disenchanted Bush followers, President Trump was elected by those disenchanted with Obama – and the pendulum swung to the right.
President Trump made a great many campaign promises, one of them being he would eliminate estate taxes. This would, in turn, remove step-up in basis on land for capital gains when the land was sold later on – a simple program used by Canada for decades.
President Trump may very well be successful in getting estate taxes and income taxes lowered or eliminated. But, even if he is, what is the possibility the pendulum will swing even further left in the next election? Isn’t it possible there are enough people disenchanted with President Trump that we may have someone elected who is even further left than Obama?
It’s possible if you look into the past and it’s resulted in a backlash from voters. Each leader has pushed their agenda harder and harder in opposite directions for the past two decades and now we are seeing the extremes.
If I had estate tax planning to do, I would finish it now. Because either the laws aren’t going to change, and you’ll be prepared. Or the laws will change and you’ll be over prepared (not a bad problem). Or the laws will change and then swing right back again farther left (higher income taxes and estate taxes) in our next election cycle and then you might be vastly underprepared. Anything appears possible today based on the last two decades.