NOW WHAT? Guidance on Post-Election Wealth Management
One thing we can all agree on is that this has been an exhausting election cycle. Let us help you breathe a little easier though. As the results of the election become clearer, our guidance remains the same as it has always been: stay the course.
Although we are still awaiting a formal conclusion to the presidential race, with a largely unchanged Congress, particularly the Republican retention of the Senate, we expect financial policies to remain largely the same. The advisors at Mosaic Family Wealth are keeping a particular eye on the Senate race run-off in Georgia. The outcome could have implications on wealth transfer laws & policies.
At Mosaic Family Wealth we are believers in the “hope for the best, plan for the worst” philosophy. Regardless of who’s in charge, a change in administration is a great time to revisit your long-term estate plans.
Although news coverage often focuses on the impact an election has on income tax, it’s important to review transfer tax laws with your wealth advisor as well, as these impact your ability to pass on your wealth to future generations.
Here are some key areas to keep in mind:
- Estate/Gift Tax – The estate tax focuses on property (cash, real estate, stock, or other assets) transfers at death. The gift tax applies to transfers made while a person is living. Currently, federal law imposes these taxes on estates valued above $10 million indexed for inflation ($11.58 million in 2020). This law is scheduled to decrease to $5 million indexed for inflation beginning in 2026.
Democrats have been clear on their desire to raise this tax to “historical norms,” meaning a dramatic reduction in the exemption back to 2009 levels of $3.5 million. Without support from the Senate though, we believe it is less likely that drastic near-term changes will be enacted. Our advisors are staying on top of these developments and are prepared to discuss how any changes, whether now or in 2026, may affect your long-term goals.
- Income Tax Basis Step-Up – Assets that are included in your taxable estate at death generally receive a “step-up” in basis for income tax purposes from an adjusted cost basis to fair market value, providing less taxes due to your beneficiaries. We expect that a potential Biden presidency will not find the support needed to repeal the step-up in basis.
- Annual Exclusion Gifts – Another potential Biden proposal should he win the presidency may be a significant reduction in the amount of estate and gift exemptions, potentially suggesting a cap on the total annual amount in any one year at $50,000. This was a policy also favored by the Obama Administration. But again, without Senate support, we do not see this type of change being enacted.
- Irrevocable Grantor Trust – This wealth planning vehicle provides assets protection for wealthy individuals by minimizing the ultimate tax burden to beneficiaries and keeping the assets out of the grantor’s taxable estate at death. We believe these trusts will continue to be used as a powerful tool to exclude assets and any appreciation from the grantor’s taxable estate at death.
In the increasingly unlikely scenario that Mr. Trump retains the White House, we don’t expect any changes to wealth impacting policies. A Biden presidency may not have the ability to make many changes either. Pushing fiscal policy changes through without Congressional support is highly unlikely. Keep in mind that differing policies are always being proposed in Washington, so don’t be alarmed when you hear about new ideas being discussed. The team at Mosaic Family Wealth stays abreast of the fluctuations and eventualities and can always provide you with solid guidance that can offer you peace of mind.
We encourage individuals to revisit their estate plans regularly with their team of advisors including their estate planning attorney, CPA, and wealth advisor. This is particularly important around a significant event, like a national election and potential legislative changes. We are ready to guide your unique circumstances, ensuring that you continue unimpeded on your journey from success to significance.
Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing in this content is intended to be, and you should not consider anything in this content to be, investment, accounting, tax, or legal advice. If you would like investment, accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs.
Mosaic Family Wealth, LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Mosaic Family Wealth, LLC and its representatives are properly licensed or exempt from licensure.