More News About the Repealed Estate Tax

Six months into 2010 and the estate tax repeal is still making news.  This time it’s a story about Texas billionaire Dan L. Duncan who died in March, leaving all of his billions to his spouse, family and various charitable organizations… and none to the government:

“Had his life ended three months earlier, Mr. Duncan’s riches — Forbes magazine estimated his worth at $9 billion, ranking him as the 74th wealthiest in the world — would have been subject to a federal tax of at least 45 percent. If he had lived past Jan. 1, 2011, the rate would be even higher… Instead, because Congress allowed the tax to lapse for one year and gave all estates a free pass in 2010, Mr. Duncan’s four children and four grandchildren stand to collect billions that in any other year would have gone to the Treasury.”

According to the NY Times article this news is meeting with mixed reactions.  Opponents of the estate tax (sometimes called the death tax) are hoping to make the repeal permanent.  Others, however, don’t agree:

“’The ultrawealthy in this country will still be able to pass on enormous wealth to the next generation,’ said Chuck Collins, who studies income inequality and has worked with billionaires like Warren E. Buffett and Bill Gates to promote an estate tax. Mr. Collins argues that the tax is a ‘recycling program for economic opportunity.’”

Whatever happens in future years, considering that this year is already half over it can only be hoped that heirs and executors won’t have to worry about the tax being reinstated and made effective retroactively; which leaves us free to look ahead and plan for 2011 when the estate tax comes back at a whopping 55%. If you’re wondering how all these changes will impact your estate plan today, tomorrow, or years in the future please call our office.

Senate Considers Option to Prepay Estate Taxes

2010 has been anything but ordinary as far as the estate tax is concerned.  First there was the unexpected repeal of the estate tax (unexpected not because the repeal was unplanned, but because nobody expected it to actually happen), then the idea that congress could reinstate the estate tax and make it effective retroactively, and now there are rumblings that certain  Senators are considering a prepaid estate tax!

According to this article in the Christian Science Monitor, “News reports suggest that the Senate may soon consider restoring the estate tax with an option allowing people to prepay their tax before they die. Details are apparently still in flux as senators negotiate. We—and maybe they—don’t know yet what they’ll propose for the basic estate tax but it’s unlikely to be harsher than the 2009 version.”

If something like this gets passed, a visit to your estate planning attorney will be more important than ever, especially if you have the wealth to protect and the means to spend some money now to save a lot of money later.

Of course, this is all just speculation right now, but even the idea of prepaid estate taxes tells us just how much the government is counting on that revenue—one way or another.  If you were under any illusions that the repeal of the estate tax might turn into a permanent thing this should be more than enough to convince you that the estate tax is here to stay.

Robin Hood Lives On: Tax Breaks to Help Your Family

It may seem like you just can’t catch a break when it comes to paying taxes, but according to this article in the Wall Street Journal there are a few little known tax breaks that could end up saving your family money.  Some are new—so new, in fact, that it is still before the Senate—such as the tax exemption for employer provided cell phones and smart phones; and some—like the tax free income homeowners can earn if they rent out their home for 14 days or fewer during a year—have been around for a few years.

Of particular interest to our clients is the gift tax exclusion (another lesser known tax break that has been around for a few years.) As stated in the article, “Anyone may give anyone else up to [$13,000] per year in cash or property, free of gift tax. One partner of a married couple can double the gift and the exemption. So a couple with three married children and six grandchildren could give away over $300,000 a year, tax-free.”

We say that this gift tax exclusion may be of particular interest to our clients because if you are looking for a way to lower your estate tax, or anticipate applying for government medical services in the next few years, giving gifts to loved ones right now may help you achieve your goal—if you go about it the right way.

Contact our office for more information on how any of these “Robin Hood” tax saving techniques may help your family this year.

Tax Tips to Benefit YOUR Family

Tax day is coming up quickly, are you ready to file?  And just as important—are you taking advantage of all the savings and deductions available to you? Most people who do their own taxes are unaware of some of the lesser-known deductions which can help you save money come tax-time. We have a couple of articles we’d like to share with our readers that may make it easier for your family come April 15th.

A recent article on SmartMoney.com offers 3 often overlooked ways to save on your income taxes. Two of the three items have to do with parenthood and buying a home, but of particular interest to our readers is tip #2, Selling Grandma’s Stuff: “If you sold something last year that you inherited, understand that your tax basis for gain or loss purposes generally has nothing to do with what your benefactor paid for the asset. And that’s probably going to save you a bundle in taxes.” If you sold an asset from an inheritance last year (or if you received an inheritance last year at all, regardless of whether you’ve sold the asset or not) contact our office before filing your taxes.

Another potentially useful resource for tax savings is the ABC News article Top Ten Commonly Missed Tax Deductions to Put Cash in Your Wallet. This article reminds us to include the little things—such charity volunteer related expenses, the new car deduction, old school books used for work, and more. There are a number of tax deductions your family may be able to take advantage of… if you just know where to look. 

Tax Moves to Make Before the End of 2009

Why do people give so many charitable gifts in December?  The holiday spirit may not be the only thing inspiring people to give to the less fortunate this month, it may also have something to do with lowering your 2009 tax bill. If it’s taxes you’re worried about, there are a few other moves you can make after you’ve done your charitable giving. Ashlea Ebeling of Forbes has a whole list of things you can do to lower your 2009 tax bill before year’s end, we’ll mention just a few of them here:

  • Fund those retirement savings accounts.  As the article above points out, you can fund your 2009 retirement accounts up until April of 2010, but if you have an employer who will match your investment it’s likely they’d like to know before the end of the year what amount they’ll be matching. If you’re self employed you’re on a tighter schedule because the deadline for setting up a solo 401(k) is December 31.
  • If have plans to receive any expensive medical procedures in the near future that won’t be covered by your insurance, you may want to consider having them done before January 1st. Unreimbursed medical expenses that exceed 7.5% of your adjusted gross income are deductable.
  • If you’re in the market for a new home, the homebuyer credit has been expanded from November 30th to May 1st 2010.  This credit used to be only for newcomers to the real estate market, but is now available for both new homebuyers and longtime homeowners looking to purchase a new home.
  • A different—but related—course of action is making upgrades to the home you already own. Certain energy efficient improvements to your home can also get you a credit on your taxes… if you get the improvements done before the end of the year.
  • One more way you may save money on your taxes this year that you won’t find mentioned in the Forbes article is to create an estate plan which includes a trust. To the extent that the legal planning services cover tax advice or regard income producing property, the fees you invest in establishing and operating a trust are deductible from your federal income taxes.

All of these are good ways to save money on your 2009 taxes, but action needs to be taken before the end of the year.  That gives you only… 24 days left to take action!