As with all views of outside contributors, the usual editorial disclaimers apply, but the editors want to thank AITi Tiedemann Global for its contribution to these important topics. As we regularly remind readers, this news service is a platform for discussion and debate – so please make full use of it. Email tom.burroughes@wealthbriefing.com and amanda.cheesely@clearviewpublishing.com

With President-elect Trump’s victory in November, many believe that all or most of the tax laws enacted by TCJA in 2017 will be extended past December 31, 2025. The cost of doing so, however, is estimated to exceed $4.6 trillion dollars over 10 years. The incoming Trump administration has also proposed a number of other individual and corporate tax breaks which could add as much as an additional $5 trillion to the deficit . .

With inflation and interest rates predicted to be higher for longer and the current deficit at nearly $2 trillion and growing, there will be a significant amount of pressure in Congress to reduce the deficit wherever possible. And with the Republicans holding a narrow majority in the Senate and House , any tax mitigation proposal could fail to obtain a majority and be either defeated or compromised. 

Regardless of whether TCJA is extended or other proposed tax changes pass the House in 2025, keep in mind that in two years all 435 seats in the House of Representatives and 33 or 34 of the seats in the Senate will be up for election. Historically, especially during a president’s second term, midterm elections often see the president’s party lose seats in Congress and the opposite party gain control of one or both houses of Congress. .

In an informal survey of ACTEC fellows, most practitioners thought the TCJA would be extended in part, but only perhaps for four or five years, in an attempt to reduce costs and leave it to the next administration to deal with. And many predicted that eliminating the current restriction on the SALT deduction would be a higher priority. All agreed, however, that the next time they have control of Congress, Democrats will revisit any tax changes that are made now. The stark reality is that tax policy is no longer permanent.

So, given all of this uncertainty, what should wealthy families do? A strong argument can be made that, in line with a family’s particular objectives and financial circumstances, consistent planning over time will provide protection from political volatility. Some families are creating “stand-by” trusts or other structures that they will nominally fund now and then fund with additional assets if/when Congress acts. 

But there are many other important reasons for doing effective planning, by implementing new strategies or modifying existing strategies sooner rather than later: to protect assets from creditors or in the event of a divorce, obtain a step-up in income tax basis of highly appreciated assets at death, remove the future appreciation in assets from a taxable estate, provide protection for yourself and/or loved ones in the event of an incapacity, provide for professional management and/or distribution of assets, etc. Knowledgeable professionals have a veritable “alphabet soup” of strategies to address any family’s particular needs and goals properly and effectively.