The administration’s one-pager isn’t likely to become law tomorrow. Meanwhile, planners are doing a few things beginning with staying focused on their clients’ objectives.
“We always bring it back to their individual situation” when clients ask about the impact of potential tax-law changes, says Martin. For instance, he’s urging philanthropic clients to continue giving for the personal, non-tax benefits they reap from beneficence.
Maintaining flexibility in estate planning documents is critical right now, according to Matz, the Manhattan practitioner. It’s possible the estate tax will remain intact. “Or there could be a single aberration year like 2010, the year that there was no estate tax and [New York Yankees owner] George Steinbrenner died worth over $1 billion.” Clients’ plans should be able to accommodate—and take maximum advantage of—the entire range of possibilities, Matz says.
Staying flexible includes considering post-mortem planning, he adds. “There are various elections that can be made post-death, such as the Clayton QTIP election and cascading disclaimers, as long as the framework for using these techniques is provided in the estate planning documents,” Matz says.
Finally, advise clients not to make transfers that would cause them to pay a gift tax. Such a payment could be viewed as unwarranted if the estate tax gets eliminated, Matz says.
The White House’s proposal sheet concludes with the phrase, “and can pass both chambers.” That could prove difficult with 52 Republican Senators and 60 votes needed to avoid a filibuster by Democrats, who disapprove of the measures.
To enact the president’s agenda, Republicans could follow a procedure known as reconciliation.
“A budget reconciliation bill cannot be filibustered, its provisions have to be revenue related, and it cannot produce a deficit beyond 10 years,” explains Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting, an information and software company in Riverwoods, Ill. Therefore, a budget reconciliation bill must contain permanent provisions that are paid for, or provisions that expire after 10 years—i.e., a so-called “sunset” made famous by the Bush tax cuts precisely because they were projected to produce a deficit beyond a decade.
Another possibility for Senate Republicans is to utilize the “nuclear option,” like they did with Neil Gorsuch’s recent nomination to the U.S. Supreme Court, and change the 60-vote requirement to a simple majority of the upper chamber, or 51.
However, “Senate Republican leaders have said very definitely that they will not abandon the 60 vote rule for filibustering legislation,” Luscombe says, “even though Trump has suggested that they abandon it.”