Insights from Todd on the 2025 Potential Shifts

Discover the intricate world of estate and gift tax exemptions with Todd Whatley, the Elder Law Coach. What could the re-election of President Trump mean for your financial future? As Todd guides us through the potential shifts in estate planning, he delves into the looming reduction of the estate tax exemption from $13.61 million per individual to a potentially game-changing $5 million by 2026. With Congress's role unclear, Todd sheds light on the strategies you might need to adopt and the political dynamics at play as this fiscal transformation unfolds.

In this episode, Todd also illuminates the nuances of gift tax exclusions, which have risen to $18,000 per person per year in 2024. Understanding this component is critical as it ties into the lifetime exemption and could significantly influence your estate planning strategy. As practitioners and clients brace for these changes, Todd equips you with essential insights to navigate the complexities ahead. Whether you're an established attorney or a budding lawyer, mastering this knowledge could transform how you approach elder law and estate planning in these uncertain times.

Links:
https://www.kiplinger.com/taxes/changes-to-estate-tax-are-coming-congress-options

https://www.kff.org/quick-take/what-trumps-2024-victory-means-for-medicaid

https://www.politico.com/newsletters/politico-pulse/2024/11/18/states-rush-medicaid-requests-before-trump-return-00190062

Check out our new website www.TheElderLawCoach.com.

Transcript

Speaker 1: 0:19

Thank you. Specialized experience, Whether you're an established attorney looking to refine your expertise or an emerging lawyer seeking a successful foray into elder law, this is your masterclass. Now let's get started with the luminary in the field. Here's Todd Whatley.

Speaker 2: 0:39

That's right. This is the Elder Law Coach and I am Todd Whatley, and thank you for joining us and, as always, please subscribe, please like and share, share with people. And today I want to talk about I'm recording this the middle of December 2024, and so there's a lot of things going on right now, and I thought this would be a good chance to kind of look at what changes are coming. Okay, president Trump former President Trump has been elected again and will start in January 20th, and I think there's going to be some major changes. Okay, there's going to be some significant changes. We don't know exactly what, and today is a little bit of may return to this a year from now and think, well, that was really wrong, but it is something that I think we should talk about and it's a few things I want you to think about, okay, so one thing that we know is going to happen is the estate tax exemption is well, probably going to change If nothing happens, if Congress doesn't get excited and do. Of 2017, it increased the estate tax exemption to what is now is $13.61 million per individual for 2024. And this, under the TCJA, is going to revert back to $5 million, adjusted for inflation, after December 31st 2025. So basically January 1st 2026, it's going to be a $5 million exemption and that's going to be a significant change in how we practice, because I think I have one client right now, over the last you know memory, that has a taxable estate. I typically don't work with too many clients that have taxable estates and so this has never been a thing. But at $5 million and particularly with the way the stock market's done and here in Northwest Arkansas and a lot of places in the country, real estate has gone up substantially and so you've got some couples that are looking at either now being at over $10 million or, if the economy continues to do what it's done, they're going to have a taxable estate, and that changes a lot of your estate planning, a lot of the way that you do things, and if that continues to go, you need to make some changes and you need to be very aware of this in your practice.

Speaker 2: 3:56

Now, based on a Kiplinger report that I have seen, that seems to be the most honest assessment is that the proposed changes are President Trump aims to make the heightened exemption permanent. Okay that he passed this. This passed during his term and I think it is his desire that this stay permanent. And since you do have Republicans in both houses and now the presidency, I think possibly that's going to occur. And one of the cynical things that I've heard and it seems to make sense is don't be surprised if Congress you know they're going to have a lot of things to address in 2025. Ok, they're going to be busy, they're going to be doing things and plus we're, you know, in 2026, there's going to be elections the midterm elections for a third of the senators in the entire House.

Speaker 2: 5:04

I would not be surprised if, for some reason, they did not address this and they let that reduction occur and people kind of panic and think, wait a second, this is terrible, we've got to do something. And one third of the senators in the entire House, you know, campaign on oh, we need to fix this, you need to put me back into office or I need to go into office so I can fix this. So it would not surprise me if they let it go bad so they could fix it. I know that's very cynical, but in this political environment, I would not be surprised if that did happen. But this is something that you need to. You know, if Trump comes in and immediately recommends it. It is going to take an act of Congress literally to do that. To you know, keep it at the current level because it's set to expire, subject to congressional action, all right.

Speaker 2: 6:03

So number two, kind of in the same line, is the gift tax exclusions, and so this has been going up every year and it is currently at or in 2024, it's 18,000 per person per year that you can give away, and that is tied to your lifetime exemption. Anything over that, if you give away more than $18,000 per person per year, anything above that comes off of your lifetime gift exemption, which is the same as your estate tax exemption, which is $13.61 million. Again, that is supposed to go down, and the proposal is that Trump is going to keep that 13.61 million in place. All right, I think both of those are very much tied together and I think if one changes, the other will change also. So for 2025, that's a huge potential, you know. So for 2025, that's a huge potential way for people to get a substantial amount of their assets outside of their estate without causing gift tax or estate tax problems, and so I know a lot of financial advisors are advising their clients. This is a good opportunity to set up charitable remainder trust and irrevocable trust so that you can get a large portion of the estate out from your client and to the kids, taking advantage of that $13.61 million this year and in 2025. Ok, so you know, I think clients need to be made aware of that and this is a good opportunity for you to get people in and to work with financial advisors to say, hey, let's do an irrevocable trust, let's get this outside of the estate, utilizing this year's exemption, because it may not be here next year. Ok, all right, so let's get to Medicaid funding. I think that is always on the chopping block, and when I say it, I'm talking about Medicaid in general. As elder law attorneys, we typically, you know, our focus tends to be the aging. Our focus tends to be the aging, the aged and disabled Medicaid, which is way different than younger people, and they're going to cut waste and fraud, which it's rampant, and I think they're going to cut the Medicaid payments for clients who can possibly go to work, who just may not be going to work because the current rules don't encourage it. You may not like this statement, but it is absolutely true. There are people out there who could work and they don't and have benefits. It's true, I mean, you may not like it, but there are people on Medicaid right now who could work and they just choose not to, and so I think that's always subject to being amended or looked at or whatever. And you know, I think, going as far back as Bill Clinton, bill Clinton obviously was a Democrat and one of the things he he addressed was um welfare Medicaid and he made people work to get benefits, and that's going to be fought by a lot of people and the Democrats in Congress will fight that. That, I think, is up for a fight and we, as other law attorneys, are not so much worried about that as we are with aging funding. The reason I bring that up is, you know, I don't think aging funding. The reason I bring that up is I don't think aging funding. The long-term care funding of Medicaid is going to be adjusted much. We're pushing 20 years and I can't believe this because I remember watching TV in 2006, february the 9th 2006, when Congress passed the huge Medicaid reforms that we now live under, and I remember I said, man, this is going to change stuff a lot. I had been in it for about five years at that point and I was like this is going to change, and so that seems like yesterday to me, and so that seems like yesterday to me. But it's been 20 years. In 2026, it'll be 20 years, and so I think there may be some changes there. And that is a large part of where the Medicaid money goes. And if they want to save money on Medicaid, that's one thing that they might need to look at. But these are people who truly can't work. I mean, this is the truly disabled, this is the truly poor people who can't work, and so that's why I bring up if they're wanting to cut the Medicaid budget, I want to think they're going to cut it with people who can work and make it more difficult to get benefits if you can work and you simply choose not to. All right, I know I may offend a few people with that, but just bear with me. Just realize that is a fact and it is going to change. Or if to save money, that's where the change will occur, not with the other people. All right, changes to health care programs. And I think he learned his lesson in his last being president. In the past, I think he said he wanted to get rid of Obamacare or that program, and he faced very substantial issues with that and I don't think he's going to make that mistake again. I will tell you that the appointment of Dr Oz. Dr Oz, of TV fame, is going to lead the Centers for Medicare and Medicaid Services and he ran for the Senate, I think, in Massachusetts, and lost to Fetterman, but I think he is going to be. He's going to lead the Centers for Medicare and Medicaid Services and that indicates a focus on reducing waste and fraud and may substantially change some of the policy reforms. Okay, I think the whole Department of Government Efficiency DOGE, as they're calling it run by Elon Musk and Vivek, they're going to make some changes. Okay, vivek, they're going to make some changes. Okay, they're going to go in and cut out a lot of waste in government, and I think the centers for Medicare and Medicaid services is subject to those actions as well as anyone, and so I think there probably will be some changes in health care, for the good, for the worse, I don't know, but I think we can always address fraud. There's a lot of fraud, but when you do that, it is going to make it more difficult and, you know, cause some problems and some hurt feelings and issues, and so it's going to be interesting. But you know, again, we deal with a segment of the population that has to have medical care Under Medicare. I don't think anything's going to change for Medicare substantially. You know it's going to be there, the Medicare for All. I don't know that that's you know. I think that's off the radar for now. Which, had that been passed, had we gone to Medicare for All, I think a lot of our Medicaid practices would have diminished. I don't think it'll ever disappear, because people always need attorneys to help navigate through government appear because people always need attorneys to help navigate through government, but I think it would have changed our practice significantly and I don't see that as being an issue anymore. All right, let's talk about and I pulled this list up and in my research this kept coming up as one of the things that I want to talk about and again, this tends to be political. I'm trying my best not to be political in this, I'm just stating facts. Okay, so Project 2025, I know during the campaign that was being thrown at Trump as he was following this, he was part of that. You know he was going to implement 2025, and that is incorrect. He has constantly distanced himself from Project 2025. That was created by the Heritage Foundation, which is a conservative think tank, and it was created by them. I'm sure they hope Trump carries some of these things out, but it was not a Trump project. Okay, now, that being said, I think Project 2025 is going to play a part. There's going to be pressure into Congress to implement some of these things, and one of the Project 2025 plans was to restructure the federal health care programs, including potential cuts to Medicaid and changes to the Department of Health and Human Services. So 2025 looked at this, and you know, this conservative think tank looked at the government and said one of the things we want to implement is to restructure federal health care. We spent a tremendous amount of money, a tremendous amount of money and again, you can't look at this system and say it's perfect that there they do an ultrasound and it's a 15 minute 20 at most, it's probably more like 15 minutes. It's not invasive, it's an ultrasound. They're just looking at stuff and it's over $3,000 for that 15 minutes and it's like come on, there is no way that that can cost $3,000. And that's to private insurance. I'm sure their charge to Medicare is probably that or even higher, and you have to understand there is so much loaded billing. You know there's things going on there that can be addressed and I think you know, looking at that objectively, we as attorneys, we have to get our checks from our clients, and so we have to check pricing, check things and convince people it's worth it to hire us for them to write us a check, and that is not the case in healthcare. And I think that's one of the biggest issues is, if you could shop around and if you had some incentive to save money as a participant in this, I think we would. And I'm not saying I'm against that Project 2025 initiative. I think everything should be looked at. I think there are ways to do this, but I bring this up as you need to familiarize yourself with the project's proposals, because, even though it's not a Trump thing, I think Trump is going to have some pressure from others to implement some of those things, and so I think it's a good idea to at least peruse that and be familiar with it and, from a non-political standpoint, understand it's not Trump's thing, it's outside of Trump, but he may be faced to address that. He may be faced to address that. I think one of the things we see with this incoming president is states' rights. Okay, I think he is pushing things down to the states, which I love. Okay, I'm not a big federal government guy because federal government is so out of reach. You have to travel to DC to meet with the people making federal decisions. They don't care about us. They're all in this little hallway of influence where they're all together and they all come together and they honestly don't care about us. And for us to have any influence, you have to call your national representative and they're busy and they have a bazillion phone calls and a bazillion things going on and, honestly, they're going to talk to the person who's standing in front of them, which is lobbyists standing in front of them, which is lobbyists, which are each other, which are influences from within that little small sphere of influence. When you push things down to the states and let the states decide. Now I just have to drive to my local capital of my state to make my voice heard. I can. You know, my local state representative is not as busy. They don't have as many constituents and you can truly find them somewhere, wherever they live or work or whatever you can get to them and stand in front of them and make your voice heard so much easier than trying to do it in the federal standpoint. And you know, we're all attorneys, we all understand this. With the Commerce Clause, so many things have been brought under the federal government that it's difficult to make any changes, even if your representative, if your congressman or your senator agree with you. It's difficult for them to make changes to agencies, because that's under the president and it's basically the fourth branch of government that they can make rules. They can do things without Congress supervision, without Congress approval. It's just gotten completely out of hand. And so I'm a huge fan of bringing things down to the state level and saying, hey, I want this controlled in the state, and that's one thing Trump is a fan of is he wants to bring things to the state, more local to you, and so I invite you, if you're not a Trump fan, to think about it that way, to think how would this be different? How much better would it be for me to deal with my state and the state that I live in be what I want it to be, rather than trying to change the entire country? Let's deal with the state and, to be honest, that's how the Constitution was written. Let's deal with the state and, to be honest, that's how the Constitution was written was for the states. It's the United States of America. They wanted the states to be independent, small governments held together by this US government, and the Commerce Clause stripped power from the states, gave it to the federal government, and I think that's been a huge issue with a lot of our problems, and the states are now going to excuse me, are now going to the federal government, to, you know, seek waivers, to try, to, you know, to influence what they think is coming. And it's essential for you, as an elder law attorney, to stay up to date with what your state is doing. Yes, there are some federal changes, but states still, under the Medicaid rules, can submit waivers, change their waivers, do things, and so it's important that you know what your state's doing and be influential in that, as an elder law attorney, you can be influential. Your local representative should appreciate your input on that. Say, hey, look, here's what I do as a living, here's what I do for clients and here's how this proposal is going to change your constituents across the state. And I encourage you to stay involved, get involved with your local representative, call them and say, hey, if you ever have questions on long-term care or you know things like this, this is what I do and I would love to talk to you. Okay, again, people are all freaked out about Trump. If you don't like Trump, then you're like, oh, he's going to do all this stuff. Well, he's just the president, okay, and I do mean that. I mean, so many things have to be done through Congress and so Trump's not going to come in here and you know, outlaw abortion and, you know, do all of this stuff. He can't do that, okay, and I think we as attorneys should not fall under that mindset as much as non-attorneys. But I see some of my attorney friends are just totally freaking out. It's like, oh, my God, trump's going to be president and all of this stuff's going to happen and all these things are going to get changed. It's like, remember, congress has to act. So, you know, significant cuts to Medicaid may face public resistance. It's going to face public resistance. You know, congress, you know, particularly the House of Representatives gets voted on every two years. They have to be very close to the public. They have to be very, you know, open to what the public is saying and you know, or else they're not going to win re-election, the senators. Thankfully, they are a little more pushed out from that and I think one thing that I think you should know this but a lot of people don't know this is, if you remember, under the Constitution this is a rabbit trail that I'm just going down, but I think is important. If you remember from the constitution, senators were elected by the states, not by popular vote, which I thought was genius, so that you have the house of representatives. You know people, you know a house of 439 that represent people in a section of the state. Okay, it's their constituents. And then you have senators who are elected every six years and were not elected by the popular vote. Okay, they were not subject, they were not so much listening to the public, they were listening to the states, because the state legislature elected the senators, so they had to work with the states and do what the states said. But still, in Congress, things were created by the House, went to the Senate, or created in the Senate, went to the House. They still had to agree, but they brought very, very different perspectives to approving laws or approving bills and creating laws. There was one that was very close to the public and listened to the public, and then there was the other House that was listening more to the states, you know, in a bigger frame, to make sure the states were protected and the states could stay their little entity of government. Well, that got changed. Okay, the senators were then elected by the public and so you now have two houses elected by the public, and I think that kind of defeats a big intention of the Constitution. But it's how it is and I don't ever see it going back. I kind of wish it would, but it probably never will. However, being elected every six years kind of removes them from the current issues. You know, not being elected every two years allows them to kind of step away a little bit and look at the bigger picture and say, okay, well, I'm going to be here for six years and so therefore, I can look at this more globally rather than very specific, subject to the whim of the people. So, understand, yes, I think there are going to be some challenges and I think Trump is going to be faced. Even though both houses are barely a conservative majority, it's so close that I think any waiver by any Republican that doesn't agree will have very substantial influence over this and can side with the Democrats and cause bills not to be passed. So I still think there's the balance of government. The checks and balances are still there and you know, major wild changes are simply not going to happen quickly or easily, if at all. All right. So I hope you're still my friend. I hope you'll still listen to me. I would you know I am open to discussion on anything. If you think I was getting political, you know I try to do this as much non-political as possible, but I thought this was a good way to, I think thought this was a good opportunity to talk to y'all and let you know kind of what's coming and to encourage you to get involved or stay involved and know what's going on and let's continue to provide great services to our clients. Let's do this well and hopefully you will be back with me next time. Thank you all very much and we'll see you.

Speaker 1: 29:28

Thank you for joining this episode of the Elder Law Coach podcast. For those eager to take their elder law practice to new heights and are interested in Todd's acclaimed coaching program, visit wwwtheelderlawcoachcom. With Todd Whatley by your side, the journey to becoming an elder law authority has never been more achievable. Until next time, keep learning, keep growing and stay passionate about elder law.