Donald Trump’s victory in the recent presidential election and the continued Republican control of Congress have thwarted the threat of the federal estate tax exemption’s being lowered, as advisers for the wealthy and ultra-wealthy prepare to take advantage of the potentially extended Tax Cuts and Jobs Act (TCJA).
Trump’s TCJA, signed during his first term in 2017, doubled the estate tax exemption, which reached $13.61 million in 2024 and will increase to $13.99 million in 2025. During her presidential campaign, Vice President Kamala Harris advocated lowering the exemption to $3.5 million once the TCJA expired at the end of 2025, but Republicans in Washington now plan to extend those tax cuts.
“The estate tax exemption, if you look at the advisers around President-elect Trump, they’re all going to benefit most from the estate tax exemption; so I’m pretty confident that’s going to be extended, and it’s not going to be reduced at all,” Jeff Fishman, founder of the Los Angeles-based wealth management firm JSF Financial, told Crain Currency.
In 2016, when the estate tax exemption was at $5.45 million, a Gallup poll found that most Americans (54%) wanted the estate tax to be eliminated entirely.
“Interestingly, it’s the one tax that even people who don’t pay it are against,” said Leo Kelly, CEO of the Maryland-based multi-family office Verdence Capital Advisors. “There’s just something fundamentally distasteful that Americans find, in that after you’ve been taxed on your wages and investments and everything else, we tax you again because you die.”
For families whose wealth is valued around the cusp of the current $13.61 estate tax exemption, Fishman said they should keep high-return assets in their estate rather than move them out. Doing so allows their heirs to take advantage of the step-up in basis tax provision, which lets them pay taxes on the asset’s original purchase price to avoid capital gains tax.
“By not owning the assets at your death, you forgo the step-up in basis,” said Fishman. “And when you look at capital gains taxes, they are also pretty onerous. So at this stage, it’s far better to not use the exemption. Keep the asset; qualify for the step-up in basis, which avoids capital gains taxes; and then figure that hopefully the exemption will go ahead and take care of any estate tax exposure.”
‘More deal flow’
The lighter regulations coming from Trump’s return to office have resulted in positive tailwinds for the private equity market in anticipation of more exits and M&A activity.
“Whether it’s the new administration or simply interest rates coming down a bit, we’re starting to see a little more deal flow,” said Andrew Lom of the law firm Norton Rose Fulbright. “What was happening was family offices were getting their private equity allocation, [but] because they weren't getting exits, they couldn’t necessarily do new private equity investments because that would make them overallocated to the asset class.”
Lom, who is Norton Rose Fulbright’s U.S. head of financial services and global head of private wealth, said wealthy families could now look to transfer ownership of their private equity investments into trusts ahead of anticipated exit growth under Trump’s presidency.
“In estate planning, the general rule of thumb is move assets into trusts early when they’re at lower valuations to get the asset out of the estate, so then the growth of the asset happens when it’s in the trust,” Lom said. “There may be a planning opportunity now to take private equity assets that are still at unexited lower valuations and move those into trusts, whether that’s by gift or by sale; so that when those exits do happen, that appreciation happens inside the trust and already out of your estate.”
New life for life insurance
Another popular estate planning tactic for ultra-wealthy families is to buy life insurance plans to place into the trusts of heirs. John Resnick, founder of The Resnick Group in Florida, advises clients with net worths typically over $50 million. He is currently placing a $210 million permanent life insurance policy for a client with a $700 million net worth.
“Properly designed life insurance owned by an irrevocable trust can reduce the cost of paying estate taxes by 50% to 80% or more,” Resnick said. “Clients pay the premiums, but the insurer pays the death benefit to the trust to pay estate taxes. This is accomplished 100% estate-tax-free.
“If there’s no estate taxes due when the insured dies, the family gets to keep the proceeds. It’s a no-brainer and perhaps the greatest benefit allowed in the tax code.”