ST. CROIX INSIGHTS
Financial Strategies to Consider this Election Year
Estate planning is an important piece of everyone’s financial plan — whether you’re middle class or a high-net-worth individual. Politics shouldn’t have anything to do with estate planning, but it does. We’re in an election year and November 5th is right around the corner. The Presidential election will likely impact your estate planning strategies. So, what should you do about it? Let’s get into it.
How will the chosen President impact your finances?
The Democratic nominee Kamala Harris has proposed tax reforms that could potentially lower the estate tax exemption threshold and increase tax rates on wealth transfers. The Republican nominee Donald Trump has advocated for keeping exemptions high, possibly even eliminating the estate tax entirely. These are obviously two very opposing sides of the spectrum.
How can you prepare your finances?
No matter who wins the Presidency, there are some financial steps you may want to consider taking:
- Diversify Investments: Ensure your portfolio is diversified across various sectors and asset classes. A new administration could prioritize certain industries (like clean energy or infrastructure), while others could face new challenges (like fossil fuels).
- Understand Your IRAs: What type of IRA do you have? Traditional or Roth or both? With a Roth IRA, you contribute after-tax dollars, so you don’t get an immediate tax benefit. With a traditional IRA, you contribute pre-tax dollars, which reduces your taxable income for the year. A new President means tax brackets may change so you may want to change your contribution strategies. For example, if a new administration increases taxes on high earners, contributing to a Roth IRA now could protect your future withdrawals from additional taxes.
- Work with a Financial Advisor: Consult with a financial professional to help navigate the changing landscape and ensure that your financial strategy aligns with the new administration’s policies and the broader economic environment.
High-Earner Strategies to Consider
Harris has gone on record stating that those who make less than $400,000 per year shouldn’t see tax increases, meaning higher earners are going to be paying higher taxes.
If you’re a high-earner, here are some strategies you may want to consider:
- Accelerate gifting: Start transferring assets to heirs now while current gift tax exemptions remain high. By utilizing strategies such as irrevocable trusts, you can lock in favorable conditions before any changes take effect.
- Reevaluate trusts: Take a good look at how your trusts are structured. Many families are restructuring to shield assets from potential future tax burdens or probate courts. Charitable remainder trusts and grantor-retained annuity trusts are common tools to minimize taxes while passing on assets efficiently.
- Plan for capital gains: The current capital gains tax rate for those earning more than $1M is 23.6% and Harris has stated she supports increasing it to 28%. If this happens, selling appreciated assets now or adjusting your estate plan might help reduce future tax liabilities.
Estate Planning Beyond Taxes: Healthcare and Long-Term Care
Estate planning isn’t just about taxes — healthcare and long-term care are essential elements as well. Here’s how the candidates’ positions on these issues could shape your strategy:
- Trump’s Approach: Trump focuses on economic growth to sustain Social Security and Medicare without raising taxes or cutting benefits. His approach leans toward providing increased options for private insurance within Medicare. Trump has also emphasized lowering prescription drug costs.
- Harris’ Approach: Harris supports expanding Social Security and Medicare benefits, particularly for lower-income earners. She plans to raise taxes on high earners to ensure these programs remain funded and backs efforts to lower prescription drug prices through Medicare negotiations.
Planning for Healthcare Costs in Retirement
If Trump wins, individuals might need to plan for more private healthcare options during retirement, as privatization efforts could shift costs away from government-funded programs. Under Harris, more government-funded care could become available, but it may come with higher taxes, particularly on estates and high-income earners. In either case, building healthcare costs into your estate and retirement plan is critical, as relying solely on Social Security or Medicare might not provide long-term financial security.
No matter who the next leader of our nation is, estate planning is complex and highly individualized. Working with an estate attorney or financial advisor can help you navigate potential changes, ensure your plan is aligned with your long-term goals, and minimize a human margin of error.
Contact me today for a free consultation. Let’s review your finances and make a plan. We can review your finances, explore estate planning options, and develop a strategy to secure your retirement—no matter who sits in the White House. Staying ahead of changes in Medicare, Social Security, healthcare, and tax reform is key to protecting your financial future.
Estate planning is an important piece of everyone’s financial plan — whether you’re middle class or a high-net-worth individual. Politics shouldn’t have anything to do with estate planning, but it does. We’re in an election year and November 5th is right around the corner. The Presidential election will likely impact your estate planning strategies. So, what should you do about it? Let’s get into it.
How will the chosen President impact your finances?
The Democratic nominee Kamala Harris has proposed tax reforms that could potentially lower the estate tax exemption threshold and increase tax rates on wealth transfers. The Republican nominee Donald Trump has advocated for keeping exemptions high, possibly even eliminating the estate tax entirely. These are obviously two very opposing sides of the spectrum.
How can you prepare your finances?
No matter who wins the Presidency, there are some financial steps you may want to consider taking:
- Diversify Investments: Ensure your portfolio is diversified across various sectors and asset classes. A new administration could prioritize certain industries (like clean energy or infrastructure), while others could face new challenges (like fossil fuels).
- Understand Your IRAs: What type of IRA do you have? Traditional or Roth or both? With a Roth IRA, you contribute after-tax dollars, so you don’t get an immediate tax benefit. With a traditional IRA, you contribute pre-tax dollars, which reduces your taxable income for the year. A new President means tax brackets may change so you may want to change your contribution strategies. For example, if a new administration increases taxes on high earners, contributing to a Roth IRA now could protect your future withdrawals from additional taxes.
- Work with a Financial Advisor: Consult with a financial professional to help navigate the changing landscape and ensure that your financial strategy aligns with the new administration’s policies and the broader economic environment.
High-Earner Strategies to Consider
Harris has gone on record stating that those who make less than $400,000 per year shouldn’t see tax increases, meaning higher earners are going to be paying higher taxes.
If you’re a high-earner, here are some strategies you may want to consider:
- Accelerate gifting: Start transferring assets to heirs now while current gift tax exemptions remain high. By utilizing strategies such as irrevocable trusts, you can lock in favorable conditions before any changes take effect.
- Reevaluate trusts: Take a good look at how your trusts are structured. Many families are restructuring to shield assets from potential future tax burdens or probate courts. Charitable remainder trusts and grantor-retained annuity trusts are common tools to minimize taxes while passing on assets efficiently.
- Plan for capital gains: The current capital gains tax rate for those earning more than $1M is 23.6% and Harris has stated she supports increasing it to 28%. If this happens, selling appreciated assets now or adjusting your estate plan might help reduce future tax liabilities.
Estate Planning Beyond Taxes: Healthcare and Long-Term Care
Estate planning isn’t just about taxes — healthcare and long-term care are essential elements as well. Here’s how the candidates’ positions on these issues could shape your strategy:
- Trump’s Approach: Trump focuses on economic growth to sustain Social Security and Medicare without raising taxes or cutting benefits. His approach leans toward providing increased options for private insurance within Medicare. Trump has also emphasized lowering prescription drug costs.
- Harris’ Approach: Harris supports expanding Social Security and Medicare benefits, particularly for lower-income earners. She plans to raise taxes on high earners to ensure these programs remain funded and backs efforts to lower prescription drug prices through Medicare negotiations.
Planning for Healthcare Costs in Retirement
If Trump wins, individuals might need to plan for more private healthcare options during retirement, as privatization efforts could shift costs away from government-funded programs. Under Harris, more government-funded care could become available, but it may come with higher taxes, particularly on estates and high-income earners. In either case, building healthcare costs into your estate and retirement plan is critical, as relying solely on Social Security or Medicare might not provide long-term financial security.
No matter who the next leader of our nation is, estate planning is complex and highly individualized. Working with an estate attorney or financial advisor can help you navigate potential changes, ensure your plan is aligned with your long-term goals, and minimize a human margin of error.
Contact me today for a free consultation. Let’s review your finances and make a plan. We can review your finances, explore estate planning options, and develop a strategy to secure your retirement—no matter who sits in the White House. Staying ahead of changes in Medicare, Social Security, healthcare, and tax reform is key to protecting your financial future.