I’d like to continue our video series on Politics & Your Portfolio.
In this video I’d like to offer two final financial planning consideration during an election season…
And the first is, Do review planning opportunities: Instead of patschking with your investments during an election year, which is ill-advised, focus on the financial planning opportunities. A President has far more control over tax policy than the stock market. Having constructive conversations about wealth planning opportunities with your advisor is prudent.
In this political cycle, a key issue to address with clients is the expiration of the Tax Cuts and Jobs Act. Under this act, which is set to expire at the end of next year, a single taxpayer can claim a federal estate and lifetime gift tax exemption of $13.61 million. Couples making joint gifts can double that amount. If there will be a Harris presidency, this act may not be extended, and the exemption amounts could default back to 2017 levels (adjusted for inflation). This will make the year 2025 an opportune time for ultra-high-net-worth families to develop estate and gifting strategies to get money out of their estate before 2026.
The Harris administration also suggested increasing the tax rate for families making over $400,000 a year. This proposal makes Roth IRA conversion more interesting for high-income families, where they can pay taxes in 2025 at a tax rate that may be lower than in the coming years.
If Trump wins, you may not feel the urgency to make such moves given the prospect of a more favorable tax regime. In fact, if you think a Trump administration will lower taxes, then waiting to do certain planning, like recognizing large stock gains or selling a business, may be prudent.
And finally, Do ignore the noise: Most of the news and content disseminated during an election year is nurishkite. It’s just a way for various news networks and social media influencers to get more engagement. During these emotionally challenging times your investment north star should be this mantra: “Politics and your portfolio don’t mix.” However, if you do want to make personal financial decisions in the coming months, using the framework that I highlighted in these past few videos, can help keep you out of trouble.