If you’re concerned about the impact of estate taxes on your assets, you’re not alone. Federal estate tax laws can significantly affect the wealth you leave behind for your family and chosen organizations. To ensure your hard-earned assets benefit your loved ones and causes you support, it’s essential to establish a robust estate tax plan promptly.

Our taxation attorneys can help optimize estate tax planning strategies. We can review your existing plan and identify opportunities to reduce your estate tax burden, including:

• Estate Tax Exemptions: Leveraging provisions under the Tax Cuts and Jobs Act of 2018, we ensure individuals can pass on up to $11.2 million tax-free to heirs. Unused portions can be applied by surviving spouses, maximizing assets transferred to family members.
• Gift Exemptions: We guide you in gifting funds to specific parties without incurring estate tax. By staying within yearly limits ($15,000 per individual or $30,000 per married couple), you can gradually reduce your estate’s taxable value through strategic gifting.
• Living Trusts: Establishing trusts can lower the taxable estate value, mitigating estate and gift taxes. Our qualified attorneys assess the suitability of trusts, oversee asset transfers, and provide guidance as trustees, ensuring tax efficiency.
• Dynasty Trusts: These trusts enable intergenerational asset transfer. Although occasional income taxes may apply, distributions under the gift limit remain exempt from estate tax, ensuring long-term wealth preservation.

Charitable Trusts: Allocate a portion of your assets to fund charitable trusts, like charitable lead or charitable remainder trusts. These trusts lower the taxable estate value and allow you to make tax-deductible contributions to charities, ensuring a lasting impact. Trustees can generate income during their lifetime, with remaining assets benefiting charities upon expiration.

Yes, a taxation attorney can play a crucial role in estate planning by offering guidance on asset management and tax minimization strategies. They assist in creating essential documents like wills and trusts to fulfill your wishes.

In the realm of business succession planning, a taxation attorney helps formulate a comprehensive plan outlining the transition of your business, management strategies, and legal requirements.

Additionally, taxation attorneys provide expertise in minimizing tax liabilities related to estate and business succession planning, explaining the potential tax consequences of your decisions.

Should disputes arise during these processes, taxation attorneys offer legal representation, ensuring your wishes are honored and your interests safeguarded.

Their invaluable assistance spans various aspects of estate and business succession planning, making them essential partners in the process. With an experienced taxation attorney by your side, you can be confident that your planning processes will be executed effectively and in line with your intentions.

Trusts are subject to income tax. Taxation attorneys can employ strategies like distributing income to beneficiaries or choosing tax-efficient investments to optimize trust taxation.

Understanding these aspects of trust taxation is crucial for effective financial planning and optimizing tax liabilities.

• Simple Trusts: These trusts distribute all income annually, have no charitable beneficiaries, and don’t distribute principal. If not a simple trust, it’s usually a complex trust or a grantor trust.
• Grantor Trusts: In grantor trusts, the grantor retains certain powers, allowing them to be taxed personally. Powers include revocation, substitution of assets, borrowing without security, or receiving trust distributions.
• Trust Tax Filing: Simple or complex trusts must file a tax return if they have taxable income or gross income over $600. Grantor trusts use the grantor’s SSN for tax documents unless they obtain their own taxpayer ID.
• State Income Taxes: Trusts are subject to state income taxes if the state has jurisdiction over them. Rules vary by state, potentially leading to taxation in multiple states.
• Deductions: Trusts can claim deductions for state taxes, trustee fees, and tax preparer fees. Deductions are applicable to taxable income portions, ensuring tax efficiency.
• Income Distribution Deduction: Calculated based on Distributable Net Income (DNI), deductions reduce the trust’s tax burden. Excess distributions can be passed to beneficiaries, who report them on their individual tax returns.
• Tax Rates: Trusts have compressed tax brackets (10%, 24%, 35%, 37%). They pay more taxes than individuals due to these brackets’ limited range.

65-Day Rule: Trustees can distribute income within 65 days after year-end, treating it as the previous tax year’s income. This strategy can shift the tax burden from the trust to beneficiaries, potentially at lower rates.

A taxation attorney can help you protect assets from creditors:

Asset protection is not an excuse to evade financial obligations but a way to safeguard against misleading litigants and unjustified creditor claims while ensuring tax-effective wealth distribution to loved ones.

• Purchase Insurance: Invest in insurance coverage like umbrella, errors and omissions, professional and cyber liability, and personal liability insurance to safeguard against speculative claims.
• Transfer Assets: Protect assets by transferring them to trustworthy family members or irrevocable trusts, preventing creditors from seizing them, within legal boundaries.
• Re-Title Assets: Simple yet powerful, re-title property, such as holding a home as “tenants by the entirety,” shielding it from personal debts, except for joint liabilities.
• Make Retirement Contributions: Contribute to qualifying retirement plans like 401(k)s, sheltering funds from most creditors. Note that IRAs offer limited protection.
• Establish LLC or FLP: Utilize limited liability companies (LLCs) or family limited partnerships (FLPs) to redistribute wealth among family members. These structures safeguard assets and simplify wealth distribution.

Create a Domestic Asset Protection Trust (DAPT): DAPTs shield assets from creditors even if you’re a discretionary beneficiary. They’re established in states with favorable legislation, offering varying levels of protection.

Life insurance policies play a vital role in estate planning, offering a tax-efficient way to provide for beneficiaries. If planned correctly, life insurance proceeds can be excluded from the decedent’s estate, avoiding estate taxes. Here’s how it works:

Ownership and Inclusion: If the insured “owns” the policy, the proceeds become part of the insured’s estate upon their death. Ownership includes having control over the policy, such as changing beneficiaries, surrendering or canceling the policy, assigning or pledging it for a loan, or obtaining a loan against its surrender value.

Irrevocable Life Insurance Trusts (ILITs): To prevent policy proceeds from being included in the estate, individuals often transfer the policy into an irrevocable trust, relinquishing control. Alternatively, the trust can be funded with cash to purchase a new policy. By doing so, the settlor surrenders all control, ensuring the proceeds are not subject to estate taxes.

Funding the Trust: Acquiring a new policy is the preferred method for trust funding. Transferring an existing policy into the trust may lead to inclusion in the estate if done within three years of the settlor’s death.

Tax Implications: The increase in the policy’s value is not taxable income for the trust, offering tax benefits. While the settlor can pay premiums, they shouldn’t be the trustee owning the policy. Careful planning ensures premium payments qualify for gift and generation-skipping transfer tax exclusions.

Avoiding Ownership Attribution: The trust assets must not satisfy any legal obligations of the insured to prevent ownership attribution. Such precautions are vital to maintain the policy’s tax advantages.

By understanding ownership nuances and utilizing irrevocable trusts, individuals can safeguard life insurance proceeds, ensuring a tax-efficient transfer of wealth to beneficiaries.