Articles Posted in Estate Tax

Preferred Partnership Freeze

It is no secret that a well-put-together Houston estate plan can save younger generations an enormous amount of money. However, few are aware of the rare opportunity for estate tax savings caused by the economic conditions surrounding COVID-19. By taking advantage of a Preferred Partnership Freeze (PPF), high net worth individuals can avoid costly estate taxes and continue to take full economic advantage of their assets. Individuals will want to act quickly to seize this opportunity, as this is hopefully a once-in-a-generation opportunity that may not be around for long.

The recent economic shutdown due to the COVID-19 pandemic has decreased the value of many assets, including closely held businesses, investment portfolios, and real estate properties. A Preferred Partnership Freeze allows individuals to freeze the current valuation of such assets, and recognize certain benefits down the road as a result. For assets expected to appreciate, future interests can be placed into a trust avoiding estate taxes on the increase in value. For depreciable assets such as rental real estate, individuals can take advantage of estate tax deferral as well as a tax-free step-up in basis, and increased depreciation and amortization.

2.7.20This time of the year is a great time to revisit your estate plan, so you can ensure your legacy is protected for years to come.”

Many of us set New Year’s resolutions to improve our quality of life. While it’s often a goal to exercise more or eat more healthily, you can also resolve to improve your financial well-being. It’s a great time to review your estate plan to make sure your legacy is protected.

The Tennessean’s recent article entitled “Five estate-planning steps to take in the new year” gives us some common updates for your estate planning.

6.14.19Estate tax, death tax, income tax and inheritance tax: what do they mean for your estate and your heirs? You’ll want to be sure to know the difference between them, as you create your estate plan.

Most people don’t have to worry about the federal estate tax, which is often referred to as the death tax. Unless your estate is valued at more than $11.4 million ($22.8 for couples), you won’t be paying this tax. However, says Forbes in a recent article, “Eight Things You Need To Know About The Death Tax Before You Die,” that doesn’t mean your estate and your heirs won’t have to pay income taxes or inheritance taxes.

Assets in your name only and everything else you had control over will be added into your gross estate. For example, all stocks, bonds, bank accounts and life insurance death benefits are included, as well as any real estate, business interests, jewelry, household furnishings and artwork.

5.22.19Some people give generously all year long, supporting local nonprofits and taking care of their family members. If that’s you, perhaps it’s time to consider taking a more strategic approach to lifetime giving.

Not everyone gives because they are looking to minimize their taxes. If you’ve reached the age and stage where you have accumulated more than enough wealth to retire on, you may enjoy being generous and seeing the impact your gifts can have on the lives of those you love, or those who are less fortunate.

WMUR’s recent article, Money Matters: Lifetime non-charitable giving,” explains that lifetime giving means you dictate who gets your property. Remember, if you die without a will, the intestacy laws of the state will dictate who gets what. With a will, you can decide how you want your property distributed after your death. However, it’s true that even with a will, you won’t really know how the property is distributed, because a beneficiary could disclaim an inheritance. With lifetime giving, you have more control over how your assets are distributed.

1.3.19Single with a net worth less than $11.4 million in 2019? You’re in luck—you can die knowing that all of your money will pass free of any federal estate tax to your heirs.

It was good news for the wealthy—the Tax Cuts and Jobs Act (TCJA) amped up the unified federal estate and gift tax exemption to $11.4 million for 2019 (and up to $11.18 million in 2018). If that wasn’t generous enough, those exemptions will be increased annually for inflation from 2020 to 2025. As comedian Mel Brooks would say, “It’s good to be the king.”

MarketWatch’s recent article, “How single folks should handle estate-tax planning under the new tax law,” explains that taxable estates above the exemption will have the excess taxed at a flat 40% rate. An individual’s cumulative lifetime taxable gifts in excess of the exemption are taxed at the 40% rate. Likewise, taxable gifts are those that are more than the annual federal gift tax exclusion of $15,000 for 2018 and 2019.

12.22.18An end-of-year decision from the IRS about the new tax law and gifting has given people with generous spirits and hefty bank accounts reasons to be cheerful about gifting.

Increases to basic estate and gift tax exemptions were welcome by many, when the new tax law details were unveiled. However, questions were raised: how long will those exemptions be in place? What happens when they expire?

The changes increased the exemption to $10 million per person from $5 million. When you account for inflation adjustments, that exemption is currently at $11,180,000 for 2018, increasing to $11,400,000 for 2019.

8.21.18Don’t assume that the new tax law means that you don’t need an estate plan. If anything, you need to review your estate plan to make sure you’re not missing out any new opportunities.

When was the last time you reviewed your estate plan? If it’s been more than a few years, you could be risking making some big mistakes, in terms of taxes and what you leave behind for your loved ones.

The new tax law in effect doubles the federal estate-tax exemption to roughly $11.2 million per person. As a result, most people won’t be subject to federal estate tax. However, before you unfriend your estate planning attorney on social media, understand that the drastic increase in the federal exemption amount means that old wills and trusts may be in dire need of an update.

8.15.18When the family vacation home is passed from one generation to the next, there are certain tax issues to be aware of, particularly the step-up in basis.  However, there may also be state taxes.

The first part of understanding the tax responsibility when you plan on giving it to your family vacation home to adult children who live out of state, is to understand the definition of “basis” and “step-up in basis.” These terms refer to income taxes and are used to determine any gains or losses on the sale of the property.

When you die, property that you own or control is valued as of the date of death. The children who inherit the property take it with that value as their basis. The first thing is to determine the parent’s basis in the property.  You should then look at how the basis of inherited property is handled. Generally, the basis of property inherited from a decedent is one of the following:

5.19.17Some states are cheaper to die in than others, that is, when it comes to death taxes.

The average American doesn’t have to worry too much about paying a federal estate tax, as the current federal estate tax exemption is a generous $5.49 million for 2017 and twice that if you are married. But that’s not the only death tax you and your heirs may encounter, depending on where you live or, more accurately, where you die.

MarketWatch’s article, “Here are the 20 most expensive places in America to die,” reminds us that about 20 states and DC have their own estate or inheritance taxes, or both. Some have exemption thresholds below the federal amount. Therefore, if you live in one of these states, you may be exempt from the federal estate tax, but still exposed to a significant state death tax bill.

11.18.16TOM’S 9 TAX TIPS AND FACTS RELATED TO SUCCESSION PLANNING(1)©

1. Estate tax, the cruelest tax. You are taxed once on the income you earn. You save some of what you earn and are successful. If you die with “too much”, you are taxed again on your hard earned savings.

2. Only Federal; Texas does not have an estate or an inheritance tax.

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