
With the inauguration of Donald Trump as the 47th President of the United States of America yesterday (Monday 20 January), attention now turns to what the returning President will prioritise in the early days of his administration.
Whatever it is, we know he wants it to happen fast. “I will act with historic speed and strength and fix every crisis facing our country,” Trump declared at a pre-inauguration rally for supporters on Sunday.
Tracey Neuman, Private Client Executive at Ocorian, and Portia Amato, US Practice Lead at Bovill Newgate, part of the Ocorian group, have identified three changes for private client professionals to watch out for in the early days of Trump’s second administration:
1. Residency-based tax
In December, the Residence-Based Taxation for Americans Abroad Act (RBTAA) was introduced, hoping to capitalise upon major tax reforms that Trump’s administration is expected to be enacting early in 2025.
If the Act is approved by Congress then it would fundamentally change how the US generates tax revenue, and move from a citizenship-based criteria to a residency-based one.
Currently, anyone who is an American citizen is liable to pay American tax on worldwide income. The RBTAA would change that so that US citizens living abroad would only pay American tax on income coming from a US source.
This would ultimately be far simpler to enforce for the internal revenue service (IRS), which is also likely to be impacted by President Trump’s stated intention to slash the size of government by budget and personnel.
2. Extend the Tax Cuts and Jobs Act (TCJA)
A flagship measure of Trump’s first term as President was the TCJA, which delivered on his promise to slash taxes.
The same promise was made repeatedly on the campaign trail last year and, combined with President Trump’s ‘America-first’ policymaking, makes it seem likely that the TCJA, which expires at the end of 2025, will be extended.
Part of the TCJA that will be especially pertinent for trustees, wealth managers and fiduciary professionals who deal with corporate services and their tax affairs is Global Intangible Low Tax Income (GILTI). GILTI calculates the US tax payable on US multinationals’ foreign earnings.
Currently, the tax payable on GILTI is around 13% and is set to rise to circa 16% in 2026. If TCJA is extended, then this lower rate will continue for longer, potentially changing corporate approaches to registering their businesses, IP and intangible assets overseas.
A further measure introduced by the TCJA was the increased estate duty allowance for American domiciliaries. Unless extended, the estate duty allowance will decrease from $13.99m to around $6m at the end of this year. This could have a significant impact for the wealth planning industry as high net worth individuals try to lock in the benefit of the current higher estate duty allowance.
Again, a wide range of tax cuts is expected to be introduced, but it remains to be seen whether this comes in one package or is piecemeal; perhaps this will be shaped by how quickly the President and his administration want to claim their victories?
3. Regulation and compliance
President Trump faces a big task to balance his priorities and stated intentions; he has promised privileging the domestic economy ahead of foreign ones, he values American manufacturing and jobs, he believes in wealth generation and accumulation, and he wants American money to stay in America’s coffers.
But he also wants a small government that has little reach into the day-to-day lives of American citizens. He is backed extensively with wealthy businesspeople and tech entrepreneurs, and he himself has a complex set of financial affairs.
Our best advice at the start of this political term is to stay informed and keep abreast of new rules and legislation. The government will be pursuing an America-first agenda that wants to keep as much money and investment as possible within US borders; any firm or ultra-high-net-worth-individual (UHNWI) who prefers to invest globally will find that much more difficult.
We’re already advising our clients who hold interests elsewhere to tighten up their know your client (KYC) and anti-money laundering (AML) checks now, and crucially document those processes. Preparing now will stand them in good stead for any enhanced reporting requirements that could come into force under President Trump.