Estate Taxes

It comes as no surprise to anyone that action or inaction by Congress in 2012 will drastically alter the estate tax landscape.  The estate tax exemption (i.e., amount of assets not subject to estate tax at your death) will go from $5 million to $1 million in 2013 if Congress does not act.  Planning for this uncertainty can be challenging.  The best plan for many clients is to implement a “disclaimer” plan in which the surviving spouse gets to decide how much to “disclaim” in setting up estate tax avoidance trust.


End of Year Tax Planning

End of year income tax planning can go a long way in reducing overall tax liability.  Consider the following:

  1. Pay state income tax estimates before 12/31 (even though not due until 1/15)
  2. Pay property tax bills before 12/31
  3. Rebalance investment portfolios by 12/31 and recognize loss positions
  4. Contribute to IRAs and education accounts (e.g., Section 529 College Savings Plans).  Depending on the plan type, you may have until 4/15 to contribute
  5. Defer income such as sale of stocks and property having gains until 1/1.  Consider a “like-kind” exchange for any property sale resulting in capital gain
  6. For small business owners, consider delaying collection on outstanding receivables until 1/1
  7. For small business owners, consider purchasing needed items before 12/31.  Remember, purchasing items unnecessary to the business is never good tax planning!



Lower Your Property Taxes

Although property taxes can’t be avoided, they can certainly be minimized.  The following strategies will ensure you are not paying more than your fair share:

  1. Regular appeal of value (we can handle this for clients in Georgia);
  2. Apply for all exemptions available, such as conservation use, senior, homestead, surviving spouse, and disability); and
  3. Reapply for all exemptions following a transfer of property to a trust – and in many cases the trust can be drafted by use to ensure the continuance of exemptions.

Protect Your Assets

An effective family asset protection plan is to transfer assets to an irrevocable trust.  In the trust, you can preserve property tax benefits for the home-place, minimize income taxes at death, provide for asset management due to incapacity, and allow for Nursing Home Medicaid or VA eligibility.  The primary requirements are (1) that the  parent is comfortable with relinquishing control, and (2) the successive generation (children) are responsible, trusting, and independent.

Credit Benefit

Aside from asset protection and tax planning, another benefit to holding assets in a business entity is credit.  When structured properly, business entities allow you to keep business loans off of the owner’s personal credit history.  Business loans can drag down a credit score and result in an increase in the cost of borrowing – or depending on the debt-to-income ratios, can even result in losing credit opportunities.