Unless there are successful challenges by President Trump in several states with respect to vote counts, it appears that Joe Biden has won the 2020 presidential election. The Republican Party picked up seats in the House of Representatives but did not gain majority control. The Senate currently has 50 Republican Senators. Control of the Senate therefore comes down to Georgia and its runoff elections. The Republican party needs to win one of these seats to control the Senate since the Vice-President breaks ties in the Senate.
For clients, gridlock resulting from a divided government for the next two years should prove favorable (or at least provide some certainty that the tax laws will not change). However, we still believe that clients should, in the appropriate circumstances, continue with planning for the following reasons:
- Any planning that you are considering now will benefit your family and avoid estate tax and inheritance tax over the long term. Potential changes in the tax laws should not affect your decision making – your estate plan documents can incorporate flexibility to address future uncertainties.
- The 2022 mid-term election may shift control of the Senate to the Democratic party. There are 22 Republican seats up for re-election and 12 Democrat seats up for re-election. A shift in control of the Senate (and assuming the House control does not change) likely would result in the enactment of some version of the Biden tax plan, which calls for a lowering of the estate and gift tax exemption from current highs.
- The “sunset” of the current tax laws is still scheduled for December 31, 2025. It is difficult to predict what will happen this far in the future given the two election cycles between now and then. Also, the CARES Act stimulus and other anticipated pandemic stimulus could result in some form of a tax increase in the near future to address the national debt.
