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Entries in gift tax (10)

Wednesday
Nov302016

Estate Planning NOW: Preparing for a New Government

Gift Tax, Trusts & Estate Planning Attorney

by Kira S. Masteller
818.907.3244

It’s impossible to predict what any future president will do, or what Congress will approve. But in light of comments president-elect Donald J. Trump made on the campaign trail, and given that Grand Old Party members will have a majority in both houses of Congress – certain factors in estate and succession planning should be considered.

Estate Planning for Tax Reform

Trump has promised what he calls A Pro-Growth Tax Plan, designed to reduce taxes for many groups of taxpayers.

In broad strokes, the president-elect has promised lower taxes for businesses and low to middle-income families with children. The plan also promises to close special interest loopholes, repeal estate taxes (which generates a hefty 40 percent in federal income from single taxpayer estates worth $5.45M or more; $10.9M for married couples), and reduce tax brackets down to three from seven, according to Motley Fool.

If we combine Trump's and the GOP's 2015 tax reformation plans, the changes could include the broader goals above, and: 

  • Increase standard deduction amounts from $6.3K to $12K for single tax payers; and $12.6K to $24K for married couples;

  • Eliminate personal exemptions;

  • Cap itemized deductions at $100K (single), $200K (married), which could put a damper on reaping the current benefits of charitable contributions (more information on that below);

  • Repeal AMT (alternative minimum tax);

  • Repeal NIIT (net investment income tax); and

  • Repeal generation-skipping transfer taxes.

Mortgage interest deductions and charitable contribution deductions would remain under the GOP plan, but changes may be imminent.

Estate Planning for a Trump Presidency

We looked at the broader strokes above. But here are some considerations to make for the immediate future.

Trump Tax ReformCharitable Contributions: Make them now, just in case. The GOP opted to keep them, but Trump wants to "disallow" them. Currently, you can deduct up to 50 percent of your adjusted gross income when giving cash – and anything above 50 percent can be carried forward over the next five years.

Death Tax: If the federal estate tax is repealed, those with significant assets may not need to reduce the size of their estates.

Capital Gains: On the other hand, the president-elect's tax plan would levy fees on capital gains at death if they are worth more than $5M (single) or $10M (married).

Business Planning: Now may not be the time to sell business interests. Currently, income generated from those sales is taxed at over 43 percent. But if the Trump tax reformations go into effect, the tax rate could come down to 33 percent.

Again, none of us can predict what will happen should tax reforms be enacted under a Trump presidency. The main things to remember now are that charitable contributions may be worth making in 2016, and that it may be best to hold off on selling businesses for the moment. 

 

Kira S. Masteller is a Shareholder in our Trusts & Estate Planning Practice Group. 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Monday
Nov022015

Trusts, Estates, Exemptions and Taxes

Trusts & Estate Planning

 

by Kira S. Masteller

818.907.3244

 

It may be hard to believe that in 2001, the estate and gift tax exemption, also known as the unified credit, was a mere $675K.

In 2016 that credit is anticipated to go up to $5.45M for single filers; potentially $10.9M for married couples. This year, the exemption is $5.43M per individual.

These are projected figures from Thomson Reuters Checkpoint, and are based on the Consumer Price Index. The Internal Revenue Service will release official figures later this year, but the projections are probably on point, since U.S. Tax Code requires periodic adjustment for inflation.

Below the Threshold

Though not a huge increase (basic exclusion amounts rose by $120K in 2012, $130K in 2013 and $90K in 2014 and 2015) high net worth individuals and couples are reminded to review their tax planning to insure they are taking advantage of the exemptions properly and looking into other tools to keep the taxable portions of their estate as low as possible. 

The GST, or Generation-Skipping Transfer Tax exemption should also rise to $5.45M next year, and the gift tax annual exclusion will remain at $14K.  Remember: Filers may gift $14K to as many individuals as they like without reducing their lifetime gift exemption, in addition to making lifetime gifts that are reportable and do apply to their  exemption. 

Additional payments may be made for health or education expenses, and will be treated as excluded gifts so long as the payments are made directly to the provider. 

Married Couples and Portability 

Combined exemptions for married couples can get a little complicated. 

Portability should be elected on the estate tax return of the first spouse to die, even if there are no estate taxes owed. If the deceased spouse has not used his or her entire lifetime gift or estate tax exemption, the surviving spouse can “port” the remaining exemption so that it is added to his or her exemption.

All assets passing to a surviving spouse (who is a US citizen) are estate tax-free.

Kira S. Masteller is an Estate Planning Attorney and Shareholder at our firm. Contact her via email: kmasteller@lewitthackman.com, or by phone: 818.907.3244 for more information. 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Thursday
Aug012013

Maximizing Annual Gifts

Trusts & Estate Planning Attorney

by Kira S. Masteller
818.907.3244

 

Individuals with estates that are valued over the Federal estate tax exemption ($5,250,000 in 2013) should consider making annual gifts to their family now so that those assets that would be received by the family anyway, will NOT be exposed to estate taxes unnecessarily.

Your estate includes your real estate, your bank accounts, investments accounts, retirement assets, life insurance, personal property and all other assets.

You are allowed to give $14,000 to as many individuals as you desire each year prior to December 31st without having to report the gift to the IRS and a gift of $14,000 or under will not be taken against your lifetime Gift Tax Exemption. This means that you can give your son $14,000, his wife $14,000, and each of his three children $14,000 so that you have removed $70,000 that would be taxed at a rate of 40 percent (in 2013) if you left it in your estate and paid estate tax upon your death.

You can also directly pay tuition for students (your children, grandchildren and great- grandchildren), and health care expenses for your family that will not be included in your lifetime Gift Tax Exemption. This is another way to help your family and reduce your exposure to Federal estate tax at the same time.

Of course when you have less assets in your estate, you may earn less income. This is something to consider prior to making gifts. Alternatively, if you are paying excessive income taxes, by reducing your income annually, you will pay less income tax annually.

If you have any questions regarding making annual gifts, you should contact your estate planning attorney or accountant to determine whether or not you should plan to make annual gifts to reduce the value of your estate.

 

Kira S. Masteller is a Trusts & Estate Planning Attorney and Shareholder at our Firm. Contact her via email: kmasteller@lewitthackman.com for further information.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Thursday
Jul252013

How Does the DOMA Ruling Affect Estate Planning?

Trusts & Estate Planning Attorney

by Kira S. Masteller
818.907.3244

 

 

The United States Supreme Court's ruling on Section 3 of the Defense of Marriage Act (DOMA) on June 26, declaring the definition of marriage as a union between one man and one woman unconstitutional, means same-sex couples in several states can now take advantage of certain tax savings when estate planning. For federal tax purposes, homosexual married couples will now be treated the same as heterosexual married couples.

Granted, the IRS is still struggling to determine how they will deal with individual and joint tax returns for same-sex couples. But federal estate planning benefits may now apply to same-sex married couples in California:

  1. Company Retirement Plans: The Employee Retirement Income Security Act of 1974 gives spouses the right to be sole beneficiaries of certain accounts.

  2. IRA Rollover Rights: When a spouse inherits funds from an IRA or other qualified plan, s/he can roll those assets into her or his own IRA account to postpone the required minimum distributions.

  3. Annual Exclusion Gifts: Any individual taxpayer can gift up to $14K per year, to as many beneficiaries as needed, without triggering gift taxes. Together, spouses can gift up to $28K either from individual or joint accounts.

  4. Lifetime Gift Tax Exclusion: This one amounts to $5.25M for individuals, and $10.5M for married couples – significant savings for your estate.

  5. Portability: Speaking of the gift tax exclusion, portability allows the widow or widower to add the deceased spouse's unused exclusion to their own exclusion, totaling up to the limit of $10.5M.

  6. Other Tax Breaks: Using a marital deduction, spouses can make transfers to each other during life or at death.

Keep in mind that a same-sex spouse who moves to a state where gay marriage is not recognized, may not qualify for these benefits. The ruling in United States v. Windsor simply says the federal government will recognize a couple's marriage if the state where they reside recognizes the union.

Remember too, that the Prop 8 and DOMA rulings broke new ground in the legal landscape, and that for same sex couples in California and other states that recognize gay marriage, estate planning may be constantly changing for a while. Contact me if you need help keeping track of the current benefits and financial liabilities.

Kira S. Masteller is an Estate Planning Attorney and Shareholder at our firm. Email her at kmasteller@lewitthackman.com for more information.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Wednesday
Jun192013

Designated Beneficiary Assets: Consider Your Income, Capital Gains & Estate Taxes

Trusts & Estate Planning Attorney

by Kira S. Masteller
818.907.3244

 

In the third segment of our series regarding Gift Tax & Estate Planning, we'll examine assets that require designated beneficiaries, specifically: IRA accounts, retirement accounts, life insurance, accidental death insurance, annuities and payable on death accounts, which pass outside of a probate or a living trust.

Designated beneficiary assets must be looked at individually because different types of assets require different designations depending on their income tax consequences.

For example, a life insurance policy does not suffer any negative income tax consequences when being distributed upon the death of the insured – although it is exposed to estate tax consequences. Because of this, your revocable living trust can be named as the primary beneficiary of a life insurance policy.

There are important advantages to naming the trust as the primary beneficiary: 

1. If you are married and have a trust that splits into two or more trusts upon the first spouse’s death for death tax planning purposes, the insurance proceeds can be utilized in the allocation of assets between the two trusts so that none of the decedent’s estate tax exemption is wasted.

If a surviving spouse is named as the primary beneficiary of the life insurance, the proceeds of the policy are not in the trust for allocation purposes and some or all of the decedent’s estate tax credit could be wasted.

2. If you have minor children and you name them as the direct beneficiaries of the life insurance policy, the proceeds will be subject to a Guardianship proceeding (court supervised) and held in an FDIC insured account (ensuring the account is held in an insured banking institution), which will be distributed to a child upon attaining age 18. This limits the asset’s growth possibilities, the ability for an adult to use those assets for that child during that child’s lifetime, and it gives a windfall to a child at age 18 when they may not be mature enough to manage money or get assistance managing money.

Remember: If minor children are direct beneficiaries of any asset, there will be a Court Guardianship proceeding which is expensive and time consuming. 

It is better to name your trust as the beneficiary of life insurance for children so that the problems discussed here, do not occur. You may consider using a life insurance trust for the same reasons mentioned above, as well as for estate tax planning purposes – the life insurance trust will keep the proceeds of the death benefit out of your taxable estate upon your death.

If you have any questions about who to designate as a beneficiary for your assets, please contact me for help.

In my next blog, we'll look into Retirement Assets, some of their potential problems and solutions to those problems. If you'd like to catch up on previous posts in this Gift Tax and Estate Planning series, click on the embedded links above to read about Living Trusts and Life Insurance.

Kira S. Masteller is a Gift Tax and Estate Planning Attorney and a Shareholder at our Firm. Contact her via email: kmasteller@lewitthackman.com for more information.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

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