Estate planning is something most people don’t think about until it’s too late. It’s often seen as a concern for the ultra-wealthy—the kind of people with sprawling mansions, vast investment portfolios, and accountants on speed dial. But a new set of proposals from the Trump administration could change that, bringing estate and capital gains taxes into the spotlight for a much broader swath of Americans.
In this guide, we'll guide you through what you need to know about the Trump tax proposals that are being set forth by the current administration and what steps you can take now to stay ahead.
The Estate Tax Repeal: Who Really Wins?
One of the biggest headlines from Trump’s proposal is the potential repeal of the federal estate tax. At first glance, this might sound like a major win for anyone hoping to pass on their wealth to future generations. But here’s the reality: the federal estate tax only applies to estates worth more than $13.99 million. That means unless you’re among the wealthiest 0.1% of Americans, this repeal won’t directly impact your family.
Currently, only about one in every 1,300 estates is subject to the estate tax. So while eliminating it would be a big deal for billionaires and multimillionaires, it’s unlikely to change things for the vast majority of people. But before you assume this is just a tax cut for the ultra-rich, there’s another part of the proposal that could have a much more widespread impact.
The Hidden Change: Capital Gains Taxes on Inherited Property
For decades, heirs have benefited from something called the step-up in basis when they inherit assets. Here’s how it works: if your parents bought a home for $100,000 years ago and it’s now worth $500,000, you’d inherit the home at its current market value—$500,000. If you then sold it for that amount, you wouldn’t owe any capital gains tax.
Under the proposed changes, this could be eliminated. Instead, heirs would inherit assets at their original purchase price, meaning they would owe capital gains tax on the entire appreciation when they sell. Using the same example, if you inherited that $500,000 home but had to use the original $100,000 purchase price as the basis, you could be taxed on $400,000 in gains when you sell.
This is where the average American could feel a real impact. Many families pass down real estate, stocks, or small businesses, not realizing that eliminating the step-up in basis could saddle heirs with significant tax liabilities.
What Are the New Thresholds to Watch?
While the proposal doesn’t outline specific new tax brackets, the elimination of the step-up in basis means far more families would be on the hook for capital gains taxes when selling inherited assets. If your family owns a home or has investments that have appreciated over time, this change could hit you harder than you expect.
Who Needs to Worry—and What Should You Do Now?
If you are inheriting property or investments, be prepared for a possible tax bill if you plan to sell. Consider working with an estate planner to explore ways to minimize capital gains taxes.
If you are planning your estate, this change could warrant a review of how your assets are structured. Some strategies, like gifting assets while you’re still alive or utilizing trusts, may help reduce tax burdens.
If you think this won’t impact you, think again—even middle-class families who inherit homes, small businesses, or stock portfolios could face unintended consequences if these proposals become law.
The Bottom Line
While repealing the estate tax may not impact most Americans, changes to capital gains tax treatment could have major consequences for everyday families. The potential elimination of the step-up in basis means that more people will be paying taxes on inherited wealth—something that could reshape the way families think about passing down their assets.
The best move now? Get ahead of these potential Trump tax changes by reviewing your estate plan, understanding how your assets could be affected, and exploring tax-smart strategies to protect your family's financial future.
At Trust & Will, we’re here to help keep things simple. You can create a fully customizable, state-specific estate plan from the comfort of your own home. Take our free quiz to see where you should get started, or compare our different estate planning and settlement options today!
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