This is the second article in a series discussing various tax planning opportunities that should be considered in the wake of the recent elections.  The prior article discussed postponing sales until 2017.

There are at least three aspects of President Elect Trump’s tax plan that favor accelerating charitable gifts to 2016.

First, income rates will likely go down in 2017.  If you can make a gift in 2016 and reduce your taxes by 40% of the amount you give, this is likely a bigger savings than you will receive in future years.

Second, Trump proposes to cap itemized deductions at $200,000 per year.  This limitation will significantly reduce the benefit of making charitable gifts for certain taxpayers.

Third, Trump proposes to impose a capital gains tax on transfers of appreciated property to a private foundation.  It is unclear whether he intends for this rule to apply to lifetime gifts or just to testamentary gifts.  However, if this tax only applies to testamentary gifts, it could be easily avoided by making a deathbed gift.

Today, I met with a couple who are considering making a substantial charitable gift sometime between now and the first quarter of 2018.  These clients expect to receive substantial income in 2017.  I called my client’s CPA and she ran the numbers based on a hypothetical 2017 tax system consistent with Trump’s proposed plan.  The conclusion is that the clients will get significantly more tax savings by making a gift in 2016.  The gift will consist of some cash and appreciated securities given to a private foundation and some cash given to a donor advised fund.  The private foundation and the donor advised fund will allow my clients to make the gift now and pick the actual charities that will receive the funds later.  Giving part of the gift to a donor advised fund will allow the clients to save more taxes as compared to giving everything to the private foundation.

I have learned from experience that significant changes in Washington create tax planning opportunities.  Tax laws always change significantly when the party affiliation of the President flips.  It might seem prudent to wait for the laws to change before making major decisions.  However, waiting for certainty may result in foregone opportunities.

In the last few days, I have received numerous calls from clients about various tax issues that are impacted by the results of the election.  I plan to write a series of articles detailing the types of issues that my clients are confronting.

The first decision involves the timing of the sale of a significant asset.  One client was planning to sell real estate in December.  Another client was planning to sell his business in December.  These clients both contacted the buyer about postponing the sales until January of 2017.  They are hoping that income tax rates will be lower for sales in 2017.  If rates are reduced in 2017, will be the rate decrease be made retroactive to January 1, 2017?  There is precedent for making this type of a change.  However, there is also precedent for making a change effective during the middle of a year.  Postponing sales until January seems like a sensible strategy, though waiting longer might provide a better result.

In 2008, Kelley Cannon murdered her husband.  She was later convicted of first degree murder and is currently serving a lengthy prison sentence.  While serving her sentence, she has attempted to benefit financially from her husband’s death by claiming a share of his estate and an insurance trust that he had established.  Paul Gontarek and Kelly Caissie, two attorneys in our firm, recently convinced the Tennessee Court of Appeals to rule against Mrs. Cannon based upon the Slayer Statute.

The Slayer Statute prevents a killer from inheriting from the victim.  For this statute to apply, proof of the killing must be established by a preponderance of the evidence (i.e., more likely than not).  Independent proof of the killing should be unnecessary since Mrs. Cannon’s criminal conviction required proof beyond a reasonable doubt, which is a much more difficult standard.  Nevertheless, it took 8 years and two trips through the Davidson County Probate Court and the Tennessee Court of Appeals to invoke the Slayer Statute without a second murder trial.  Paul and Kelly convinced the Court of Appeals to apply a legal doctrine known as Collateral Estoppel, which permits the Court to recognize the criminal conviction as proof of the killing.

The Court reached a sensible result and allowed the decedent’s three children to inherit the entire estate and insurance trust.