Wealth Planning Workload Surges Post-Election; Estate Tax A Focus

Tom Burroughes Group Editor December 21, 2020

Wealth Planning Workload Surges Post-Election; Estate Tax A Focus

This news service has spoken to a number of lawyers, private client advisors and others about what sort of work they are doing following November's elections and the likely changes to taxation that could take place.

Estate and gift tax planning are red-hot business areas for US wealth advisors as the clock ticks down toward the start of a new US administration in 2021. And while there remain some political wild-cards – such as the Senate run-off races in Georgia for January – private client advisors think they have some clearer ideas about what clients should do. 

Family Wealth Report has spoken to a number of wealth advisors in the US about what they are advising clients about. While it appears, as at the time of writing, that a “blue wall” threat of big tax hikes might not come to pass, the need to fill public coffers ravaged by COVID-19 is bound to put wealthier citizens in the firing line. (We will run some more analysis of the estate and tax planning landscape in the New Year.)

“The one area I see clients moving forward is with their estate and gift tax planning. Wealthy people should be doing this sort of planning anyway,” Sam Petrucci, global head of wealth planning at Deutsche Bank, said. 

In 2017, President Donald J Trump’s administration signed into law a near-doubling of the estate tax threshold to $11.18 million (now up to more than $11.5 million) for a single person; and to $22.36 million for married couples. The change runs until 2025, when the rates fall back unless new legislation is enacted. The 40 per cent top rate remained. Under the current system, the executor must file a federal estate tax return within nine months of a person’s death if that person’s gross estate exceeds the exempt amount ($11.58 million in 2020). That estate generally includes all the decedent’s assets, both financial (stocks, bonds, and mutual funds) and “real” (homes, land, and other tangible property). It also includes the decedent’s share of jointly owned assets and life insurance proceeds from policies owned by the decedent.

Tax rules allow an unlimited deduction for transfers to a surviving spouse, charity or to support a minor child.

Petrucci said he has been as busy during the fall/early winter as at any time in the past decade. It is not just the shifting sands of politics that have galvanized more action – the pandemic has sharpened clients' awareness of their mortality.

“People should be doing this sort of planning anyway,” he said. 

Now is the time to think about getting planning sorted out and this is not just about politics, Paul DePasquale, partner, Baker McKenzie, based in New York, told FWR. And he said that while some personal tax matters are in play, others might not move anyway.

“Some of the provisions of the 2017 tax reforms will not be changed by the Democrats as these elements had bipartisan support, such as cutting corporate tax rates from 35 per cent – some of the highest in the OECD collection of major nations. A Democrat-controlled Congress may increase the corporate tax rate but it likely would not raise the rate back to the 35 per cent rate,” DePasquale said. 

The pandemic and associated disruption has not just accelerated financial planning, it may have given some HNW and ultra-HNW families time to think through the details. 

“People have had more time for planning than they have had before,” Deutsche’s Petrucci said.

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