Tax Planning Has Significantly Changed in Recent Years

There has been a seismic shift in the tax planning that goes on for most clients in connection with their estate planning.

In years past when the estate tax exemption amount was $600,000, $1 million or even the $3.5 million, much of the estate planning process involved helping clients structure their estates. This structuring was done to minimize the estate tax bite at their death, or at the death of the second spouse.

Income Tax Planning

Changes Due to the American Tax Relief Act (ATRA)

After the passage of the American Tax Payer Relief Act (ATRA), a relatively small percentage of the population is potentially subject to the estate tax. That happened because the estate tax exemption was increased to $5 million and was also adjusted for inflation, with the currently adjustment taking the exemption to $5.34 million.

Changes Due to Other Factors

Other changes include the seemingly ever-increasing income tax rates and add-ons, such as the Net Investment Income Tax (also known as the Medicare or Obamacare Surcharge). As a result of these and other changes, most of our clients now require more assistance with income tax planning than estate tax planning.

Our Role in Your Estate Tax Planning

While we do not prepare individual income tax returns, we do help review the assets of our clients to help minimize their income tax exposure. We will also assess the overall structuring of their entities and asset holdings. We frequently work with a client’s tax preparer to make sure that any possible current income tax savings can be realized.

In addition, with the more compressed rate schedules applicable to irrevocable trusts we can review existing trust administrations for their most tax efficient operation. We have helped many clients revise their estate plans so that any trusts to be created in the future (after their passing) are better structured. This will ensure that their assets will receive a step up in basis, whenever possible, to minimize the capital gain income tax effect to their trusts and/or beneficiaries.

Your Next Step for Tax Planning

Call and schedule an appointment today with one of our attorneys to review your income tax situation and review your estate plan. Together we can work to avoid potential land mines after you are gone.