Gift Tax

Will the Senate Estate Tax Bill Impact My Estate Plan?

Published on: April 8, 2021 | By McCulloch & Miller, PLLC

With the recent election and inauguration of the 117th United States Congress, new bills are being introduced that impact all aspects of a person’s life. According to a recent news source, one such bill is Senator Bernie Sanders’ proposed estate and gift tax reform legislation. For individuals with an estate plan in place, the introduction of new legislation gives cause for concern that it may impact their estate plan. The bill will reduce the estate tax exemption to $3,500,000 and increase the estate tax rate from a flat rate to a progressive one. Because the nuances of such a law can be confusing, below are some common questions and answers about the new estate tax bill.

What Does the Bill Propose?

The bill seeks to reduce the estate tax exemption from $11,700,00 to $3,500,000. This means if an estate is valued at over $11,700,000 currently, the heirs of the estate will need to pay a tax. If the proposal is enacted, the heirs of an estate valued at over $3,500,00 will have to pay the tax. Additionally, if the bill passes, anyone who received more than $1,000,000 in gifts from a loved one as a part of their estate plan will have to pay a tax too. The proposed exemption limits are per person; therefore, for married couples, the total exemption limit would be $7,000,000. After 2022, the exemption will continue to rise with inflation.

Why Children Should Be Included in Charitable Giving Plans

Published on: December 9, 2019 | By McCulloch & Miller, PLLC

A fear that children will not be motivated to have careers because of their family’s wealth is a concern. However, in the long run, it can hamper how wealth is handled by the next generation.

In a perfect world, discussing a family’s legacy should be a process that begins when children are old enough to understand concepts as simple as giving and the notion that wealth comes with social responsibilities. In reality, few discuss their philanthropic or legacy goals with their children.

CNBC’s recent article, “Don’t expect Mom and Dad to clue you in on your inheritance,” says that 8 out of 10 financial advisors said that “some” or “hardly any” of their clients involve the next generation in family philanthropy, according to a recent survey from Key Private Bank.

Should You Make Lifetime Gifts While Living?

Published on: May 22, 2019 | By McCulloch & Miller, PLLC

Some 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.

What’s “Hot” In Estate Planning? The ING Trust

Published on: March 4, 2019 | By McCulloch & Miller, PLLC

The ING trust is used to generate tax savings in a number of ways. For the right person, they are a trend worth looking into. Are they right for you?

The expanded transfer tax exemptions created by the 2017 tax reform legislation will end in 2026. However, in the meantime, the increased exemptions have led many high-net worth individuals and couples to review their existing estate plans. The ING trust has now become a valuable tool and could easily become the biggest trend in 2019 estate planning.

Think Advisor’s recent article, “ING Trusts: The Hot Trend in HNW Estate Planning,” explains that because of the changes from the tax reform, ING trusts have taken on new significance. ING trusts can generate significant savings, both in income taxes and in overall transfer (gift, GST and estate) taxes. This means that it can be a good idea to look into an ING trust.

Here’s How to Donate to Loved Ones and Avoid a Tax Bite

Published on: February 8, 2019 | By McCulloch & Miller, PLLC

While there’s a time limit on this great opportunity for tax-free giving—2025, unless Congress makes some changes—this is a good time to take advantage of minimizing your tax liability through generosity. There’s a new big break for top-dollar wealth transfers, thanks to the new tax law.

Basic rule: the more you give away, the smaller your estate and, therefore, the smaller your tax liability. If you’ve got a lot of wealth, this is a good time for you and those you want to make gifts to. The sooner you exploit this, the more you can give. It means that there’s less of a chance your estate will have to write a check to the IRS.

The Street’s recent article, “This Is the Golden Age of Tax-Free Gift Giving,” says the federal government has taxed estates since 1924, and as recently as 2001, the threshold when taxes kicked in was $675,000. This exemption level from taxation has been increased ever since. However, a large increase came from the Tax Cuts and Jobs Act, which took effect in 2018. The Act doubled the exemption level and indexed it to inflation. Anything above the new limits is taxed at 40%. It is $11.4 million for singles and $22.8 million for married couples in 2019.

What Singles Need to Know About the Tax Cuts and Jobs Act

Published on: January 3, 2019 | By McCulloch & Miller, PLLC

Single 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.

Tis the Season to Be Generous—Thanks to the IRS

Published on: December 22, 2018 | By McCulloch & Miller, PLLC

An 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.

Who Pays Taxes When Mom and Dad Make a Generous Gift?

Published on: January 22, 2018 | By McCulloch & Miller, PLLC

First, say thank you. Then, learn more about the rules about paying taxes on a financial gift.

Couples whose families are generous enough to give them help towards buying their first home are often concerned with what, if any, tax liability may be created. Do they have to pay taxes on the gift? Do their parents or in-laws pay taxes?

The tax laws on gifts can be pretty confusing, says nj.com in an article, “Are taxes owed on gift from in-laws?”

Best Time to Start on a Succession Plan? The Day You Start Your Business

Published on: November 15, 2017 | By McCulloch & Miller, PLLC

It may sound whimsical, but the moment you open a business is also the time to start thinking about how you’ll exit the business, whether you intend to sell to a partner, leave the entire business to a family member or sell as soon as you come up with the next big idea.

One of the biggest mistakes made by entrepreneurs is failing to create a written plan for their long-term exit strategy. What they don’t understand is that by creating a succession plan, which includes ways to boost the value of the business years before you want to sell or retire, they’ll have a created a road map for a more successful business.

Springfield (MO) Business Journal’s recent article, “Starting a business? Plan your exit now,” advises that you begin with creating a culture of success with your employees, especially the key people. That means fostering an ownership mentality, so they see their critical role in the company’s long-term success and their role in helping that to continue in the future, long and short term.

How Are Homes Taxed When Inherited?

Published on: July 19, 2017 | By McCulloch & Miller, PLLC

If you plan on leaving the family home to your heirs when you die, be aware of the tax liabilities that are associated with inheriting a house.

This is the type of estate planning decision that requires a closer look with an estate planning attorney to evaluate the pros and cons, as well as the short and long-term consequences. First, you’ll need to know the value of the house, which will be based on its fair market value on the date of the owner’s death, according to a recent article from NJ.com, “Complex inheritance taxes on a home.”

If you have a home valued at over $1 million, it may sell for close to that amount. Let’s say that you’re single and are 80 years old. You live with your widowed sister. Your will instructs that your sister should have life ownership when you pass and then it is left in trust for nieces and nephews. What would their tax bill be?