Dear Michael: We have been watching the election – like everyone else – and think maybe now would be a good time to see what President Trump does before we complete our estate planning. We have heard there are not going to be anymore estate taxes so we needn’t worry about this in the future. What other good things have we got coming under the new administration? – Looking Forward.
Dear Looking Forward: I think there are many great proposals that were put on the table during the election process. Promises of lower income taxes, repeal of Obamacare, estate taxes being not eliminated, but changed, etc.
We’ll start with the proposed estate tax changes. During his campaign, Mr. Trump proposed that estate taxes are not fair because taxes had already been paid upon the assets – with the exception of capital gains. He thought that if children or other heirs received property and they then sold the property, then capital gains would come into play on the amount the property had increased in value since the time the original owners had purchased the property.
This change from passing ten million six hundred thousand dollars estate tax free to a capital gains tax upon sale by the heirs has been introduced many, many times over the past decade. Perhaps there will be enough partisanship to pass this style of taxation now.
It is going to create an issue for people as they’ll need to keep track of what they paid for property so their children don’t have to pay capital gains if they sell – or at least use this as their basis and only have to pay upon the increased value.
If you sell grandpa’s property, finding out what he paid for it might be a bit of a trick. If it’s not in his papers, you’ll have to check the abstracts. A common method of listing these in abstracts – to make certain the neighbors couldn’t find out what you paid was to state “One dollar and other considerations”. Even in the latest generation, very few people kept real proof of what value they paid for property.
In any case, President Trump has stated he wants to look at changing the tax from one type of taxation to another type of taxation. If you have a taxable estate now, it’s likely you’ll have different, but similar, issues in the future. Your best bet is not to count on the government and do what you have to do to protect your property.
President Trump has already made good on promises to get out of trade alliances by signing bills to negate NAFTA and other international trade agreements. He promises to bring manufacturing back to the United States. How this will affect values on crops grown is anybody’s guess, as exports of our crops to these countries has been the trading chip most commonly used.
There’s also a great deal of talk about lowering the top tax bracket from thirty-nine percent to thirty-three percent. Currently, you would have to be married filing jointly and earning more than $413,000 net to exceed the thirty-three percent tax bracket. If you’ve been saving up grain or have an auction sale, such a reduction might be to your benefit and you might be able to wait until these changes occur.
There’s been a lot of talk and based on the first days of his presidency, President Trump is going to focus on trade talks.
President Trump may also go after Obamacare, as promised during the election process. This is a tricky issue as government mandates during Obama’s time frame forced people to drop their normal insurance and pick up an Obamacare policy. In North Dakota, many of the smaller health care companies up and left the state as they didn’t want to meet these mandates.
For people with pre-existing conditions, the Obama healthcare plan allowed you to enter and buy regardless of health conditions. It’s estimated that forty percent of the people who had healthcare insurance before Obamacare now have healthcare conditions most insurance carriers either would not accept or put riders upon. One hopes that before Obamacare is thrown into the scrap heap that an alternative plan would be offered to those who had to give up their prior health insurance.
All in all, people probably should not depend on the government to solve their estate planning problems. The old adage ‘I’m from the government and I’m here to help you’ should always be taken for what it is. Keep making your own individual plans and if somewhere in the future things do get better, then you only gain more.
“Keeping the Family Farm in the Family”
Great Plains Diversified Services, Inc.
1424 W. Century Ave., Suite 208
Bismarck, ND 58503-0917
Toll Free 1-800-373-4078