What the 2024 U.S. Presidential Election results could mean for estate planning

The U.S. presidential election is more than just a political event—it can create significant ripple effects in various sectors, including estate planning. With changes in administrations, tax policies, regulations, and financial considerations often shift, significantly affecting estate planning strategies. Here's a look at what the election results could mean for estate planning and why you should consider an attorney-embedded estate planning solution for your practice.

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1. Changes to the estate and gift tax exemptions

One of the most talked about aspects of estate planning during election years is the potential for changes in the federal estate and gift tax exemption. Current policies allow individuals to transfer up to $12.92 million ($25.84 million for married couples) tax-free. However, the estate tax exemption is set to sunset at the end of 2025, returning to roughly $5.5 million per individual unless extended.

A new administration might adjust these amounts or bring in new opportunities or restrictions, depending on their fiscal policies. It’s important to keep an eye out for any immediate moves or hints from the new administration about keeping or cutting these exemptions. If exemptions go down, more estates could get taxed, so it's important for high-net-worth clients to think about strategies like trusts, gifts, and charitable contributions to help with the tax impact.

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2. Impact on capital gains tax policy

The way capital gains are handled can really impact estate planning, especially for people with big investment portfolios or real estate. Lately, we've seen capital gains taxes become a hot topic in elections, with many candidates talking about changing how they're taxed when someone passes away.

A policy change to raise capital gains rates might lead clients to rethink when to sell assets or plan inheritance strategies.

One idea that's been tossed around lately is getting rid of the "step-up" in basis at death. This rule currently lets heirs skip out on paying capital gains taxes on inherited assets that have appreciated. Without this step-up, heirs might face big tax bills, leading advisors to think about strategies like speeding up gifting or using life insurance to handle potential taxes.

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3. Retirement and wealth transfer rules

Estate planning isn't just about passing on wealth after death—it's also about handling retirement accounts like 401(k)s and IRAs, which are crucial in a client's estate. Current rules restrict the "stretch" provision for inherited retirement accounts, meaning heirs must distribute assets within 10 years.

With the election results, there might be a chance for changes that could either loosen or tighten these limitations. For example, if the administration leans towards stricter wealth transfer rules, people might explore different ways to secure retirement assets for heirs or charities, making IRAs and trusts appealing options.

Plus, more options for tax-advantaged retirement accounts or other wealth-building methods could offer new strategies, so it's key for advisors to keep up with any legislative proposals (or be well-connected to estate planning expertise through an attorney-embedded platform like Estate Guru).

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4. State-level policy changes

Besides federal changes, elections can impact state estate planning too. Many states follow federal tax rules, but they might not stick to them if there are major federal changes. 

An administration that prefers shifting financial oversight to states could prompt some states to tweak estate taxes or exemptions. Clients with assets in different states should keep an eye on possible state legislation changes. For high-net-worth clients, knowing where they live and where their main assets are will be crucial for managing tax exposure.

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