As 2016 draws to a close, we're keeping an eye on three important issues that could have an impact on future wealth planning. Depending on individual circumstances, these issues may require you to take action to ensure proper preparation for what lies ahead in the coming year.

Potential Tax Code Changes 

With Republicans now controlling the White House and Congress, it's possible that we could see the first significant reforms of our tax code since the Reagan administration. Changes could include lowering the top tax rate on ordinary income, eliminating the alternative minimum tax, and eliminating estate and gift taxes.


While it's not clear yet exactly what shape a comprehensive tax reform plan would take, the potential for lower taxes in the future would suggest that it might be beneficial to accelerate deductions into the current year and to defer income. We recommend reviewing tax and estate plans to determine whether there are additional opportunities to take advantage of in a potential lower-tax environment.

Rising Interest Rates Expected

Despite the outcome of the election, we still expect a hike in short-term interest rates this December, with the potential for one or two further increases in the coming year.


Investment portfolios should be prepared for these potential increases. Fixed income portfolios, in particular, will benefit from thoughtful diversification. Interest rate hikes may also affect giving plans: charitable lead trusts or grantor retained annuity trusts can be advantageous in today's low interest rate environment, but should rates continue to rise, more benefit may be found in a charitable remainder trust.

Proposed Changes Affecting Family-Controlled Entities

This past August, the IRS released a proposed regulation (under section 2704) that would curtail discounted transfers of interest in family-controlled entities. The comment period for this regulation begins on December 1.


While the final regulations are not expected this year, it's a good idea to begin planning for it now. It's also important to consider the impact that the potential repeal of estate and gift taxes might have on this matter. Depending on how that develops, it may be wise to hold off on transfers to reduce exposure to those taxes.

If you feel that you may be impacted by any of these issues and are concerned about whether or not you're adequately prepared, we are here to help. BNY Mellon Wealth Management works closely with our clients and their advisors to devise a customized plan that makes the most sense for each individual situation.

  • Disclosure

    This material is provided for illustrative/educational purposes only. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not intended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation.BNY Mellon Wealth Management conducts business through various operating subsidiaries of The Bank of New York Mellon Corporation. ©2016 The Bank of New York Mellon Corporation. All rights reserved.