2014 Election & Estate Planning Law Changes

What Does The 2014 Election Mean For Your Estate Plan?

The saying goes, “elections have consequences” but poll after poll show Americans dissatisfied with the fact that government, no matter what party, can’t get anything done. Others argue that the beauty of our system is that the wheels are slow to turn. Whether government passes laws or not, there are still consequences of those actions and inactions. 

Turning to estate planning, the law is a fundamental component when sitting down to properly design a plan. Other key components are legacy planning, asset protection, family morals, values and goals. 

Now that the 2014 election has passed and voters have spoken, my prediction is that in the next two years, estate planning from a tax perspective will not fundamentally change. 

  • Federal Estate Taxes: The federal estate tax exemption is already $5 million (indexed for inflation) per person, so it only affects high net worth families. Republicans, now controlling Congress, have an established goal of eliminating the estate tax. However, the ‘death tax’ issue has been minimized because for most individuals, the tax is a non-issue. I predict no action happening on the federal estate tax or federal gift tax anytime soon. 
  • Stretch IRAs: There have been rumbles of discussion in Congress to eliminate the “Stretch IRA” and force beneficiaries to withdraw a Beneficiary IRA within 5 years. It’s a policy idea to generate short term tax revenue, but has never gotten out of a Congressional committee. My analysis: Congress and the President will be lucky if they can keep government open. I do not see broad tax reform on the table at this time.
  • Obamacare: Part of Obamacare includes a Net Investment Income Tax (NIIT). This is a 3.8% tax that effectively raises capital gains taxes for individuals and couples with more than a threshold amount of income. I cannot envision President Obama repealing Obamacare or any part of it during his final two years in office. This tax appears to be here to stay. For more information about the NIIT, see the IRS website NIIT page.
  • Pennsylvania Inheritance Tax: While I was following the Pennsylvania Gubernatorial election, there was no discussion of the PA Inheritance Tax that I recall. The majority of states have eliminated their inheritance tax, but Pennsylvania seems set on keeping the tax. Don’t expect our new Democratic Governor Tom Wolf to sign a repeal of the inheritance tax—-he’s been talking tax increases. Remember, life insurance remains inheritance tax-free.

The status quo, for the most part, is good news (save for the inheritance tax not being repealed). It gives you more opportunity to do non-tax planning like family legacy planning. Remember that tax planning is only one slice of the larger pie when it comes to estate planning.

It’s time to get YOUR estate plan in order before the end of 2014. Call my office today at (215) 706-0200 to schedule your initial consultation. Together, we will design a plan that is customized to meet your needs.

Posted in Tax