With Donald Trump's recent victory in the presidential election and Republicans gaining control of the Senate, substantial changes in estate planning, tax policy, and financial regulations are anticipated. This article breaks down potential policies from the incoming administration, highlighting the influence of the Heritage Foundation's Project 2025 and analyzing tax and financial planning implications under this new administration.

Project 2025 and Potential Tax Policies

The Heritage Foundation’s Project 2025 has created a framework that aligns with many of Trump's policy goals, despite Trump’s distancing from the blueprint during his campaign. Here’s what this might mean for income tax and estate planning.

Income Taxes: Project 2025 proposes simplifying the income tax code to two brackets, with rates of 15% and 30%. This shift would likely benefit high-income earners, though middle-income families might lose deductions or credits, potentially increasing their tax burden. With a supportive Senate, such tax reforms could pass more smoothly than in previous years.

Estate & Gift Taxes: Trump’s administration may advocate for making the current high estate tax exemption permanent and reducing the estate tax rate from 40% to 20%. This change would significantly benefit high-net-worth families, who rely on these policies for wealth preservation. Gifting exemptions are also expected to increase, which could enhance estate planning strategies that utilize trusts and gifts to transfer wealth tax-efficiently.

Read more: How Project 2025 Could Reshape Income, Estate, and Gift Taxes

Investment Policies: Capital Gains & Real Estate

Investors could see favorable conditions if Trump extends policies under the 2017 Tax Cuts and Jobs Act (TCJA), keeping capital gains taxes low and maintaining real estate incentives.

Capital Gains Taxes: Republicans are generally opposed to raising capital gains tax rates. The TCJA provisions currently favor long-term investment by keeping rates low, a trend expected to continue. This could benefit retirees and investors relying on investment income, creating a stable environment for growth-oriented financial strategies.

Learn more: California's Wealth Tax | The Mansion Tax!

1031 Like-Kind Exchanges: Trump's platform is likely to protect the like-kind exchange provision for real estate, allowing investors to defer capital gains taxes when reinvesting in similar properties. This longstanding provision encourages real estate investment, a priority area for the Trump administration.

Learn more: California’s Scheme to Increase Your Property Taxes!

Child Tax Credit Expansion

A potential Trump administration policy is an expansion of the Child Tax Credit, aiming to provide greater financial relief to families. Trump’s proposal may increase the credit to as much as $5,000 per child, although the final figure is uncertain. This aligns with both parties' interest in supporting families, though Trump’s approach emphasizes larger tax breaks for parents.

Navigating a Divided Congress

The new administration may face hurdles if the House remains under Democratic control, as bipartisan cooperation would be necessary to pass broader tax reforms. In such a scenario, Trump’s policies—like making TCJA provisions permanent or expanding the Child Tax Credit—could require compromise and negotiation. Historically, pre-Inauguration Day proposals often evolve, influenced by the composition of Congress and cabinet appointments.

Estate Planning Under a Trump Administration

For those focused on estate planning, the Trump administration is expected to offer favorable conditions for wealth preservation. High-net-worth families would benefit from sustained high exemptions on estate and gift taxes if TCJA policies are made permanent. Additionally, maintaining the stepped-up basis rule—allowing heirs to avoid capital gains tax on appreciated assets—is likely to remain a priority. This policy is crucial for efficient generational wealth transfer and is widely supported among Republicans.

Conclusion

As Trump's administration prepares to assume office, estate planning, tax policy, and financial strategies are poised for significant impact. While continuity with TCJA policies seems likely, much depends on the composition of Congress and the prioritization of agenda items. Families, investors, and estate planners should stay informed as these policies evolve to take advantage of opportunities or adapt to any regulatory shifts.

Learn more: Do Living Trusts File a Tax Return?

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