Wealthy Americans Seek Financial Advice as Tax Hikes Loom
As the future holds potential tax hikes for the wealthiest individuals in the United States, high-net worth clients are seeking financial planning advice to mitigate the impact on their fortunes. The expected increase in tax rates has been prompted by the expiration of several provisions of the 2017 Tax Cuts and Jobs Act (TCJA) in 2025.
One aspect that could be affected is the estate tax exemption. Under the Trump administration, the exemption was significantly increased, but experts predict that it could be halved in the next two years. The federal estate tax, which applies to the wealthiest estates, imposes a tax of up to 40% on property transferred from a deceased person to their heirs.
If the TCJA provisions sunset, wealthy families could face a substantial tax increase, with the exemption level potentially falling to around $7 million in 2026. To minimize their tax burden, high-net worth individuals have a range of options available. One strategy is gifting up to $18,000 per year tax-free to others without it counting against their lifetime gift exclusion.
Another approach is the establishment of irrevocable trusts and real estate trusts, which can help reduce estate tax bills. Many affluent individuals are currently in a holding pattern, waiting to see if the tax cuts will actually expire before taking action to minimize their taxes. The decision to extend the tax cuts will heavily depend on the outcome of the 2024 presidential election.
President Joe Biden has expressed support for higher taxes on wealthier households and businesses, whereas conservative groups argue that the tax cuts benefit the majority of Americans and stimulate economic growth. The differing viewpoints have left the future uncertain, regardless of the election result.
Financial planners are anticipating a surge in activity and tax planning once the election takes place. The potential changes and uncertainties in the tax landscape have prompted wealthy individuals to seek guidance to protect their assets and navigate the evolving tax environment.
As tax hikes loom, high-net worth clients are being proactive in securing their financial futures. With the potential for major changes ahead, seeking expert advice can be an effective way for the wealthiest Americans to safeguard their wealth and minimize their tax liabilities.
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