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Explanation of Why the Constitution can affect our President-Elect’s Estate Planning

Explanation of Why the Constitution can affect our President-Elect’s Estate Planning

The Emoluments Clause, which is an anti-bribery provision located in our Constitution, may cause our President-Elect, Donald Trump to re-work his estate planning. Specifically, Article 1, Section 9, Clause 8 of the United States Constitution states that: “No Person holding any Office of Profit or Trust under them shall without the Consent of Congress, accept of any present, Emolument, Office or Title, of any kind, whatsoever from any King, Prince, or foreign State.” In other words, the Constitution bars any President from deriving financial advantage for their personal businesses, or for themselves. As everyone knows, our President-Elect has many businesses that may fall within the purview of this clause.

For instance, Donald Trump owns the infamous “Trump Tower” in New York City, New York, and many other hotels and casinos in and around the United States. If foreign governments are paying for services at the hotel (i.e.: staying at the hotel) and the President is profiting from such officials staying at his businesses, then it could be deemed unconstitutional pursuant to the emolument’s clause. Simply stated, the President can’t take money from foreign governments.

Estate Planning and the Emoluments Clause

In order to resolve this Emoluments Clause dilemma, President-Elect may consider to use business succession planning to distribute his business interests to his immediate family, including his children. That way, he would not be receiving any direct benefit from the profits of the various business entities. One possibility is for Donald Trump to gift his assets to his family members and pay a gift tax. Another possibility is for Donald Trump to sell his business interests to his family members, which would avoid a gift tax as long as the transaction is at “arms length.” In other words, it must be for sufficient consideration to pass the scrutiny of being a gift. Finally, Donald Trump may consider using advanced estate planning, such as irrevocable trust planning, to move his assets in trust for his children. Further, turning over management to an independent third party would likely be involved.

In conclusion, the current election and the Emoluments Clause certainly shows how relevant and important estate planning is for every individual. Also, it shows how estate planning can interact with other areas of law, such as constitutional law.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.