We take this opportunity to share several important recent developments that may likely impact your assets and taxation as it pertains to tax planning. We can assist you in preparing for the changes, including development and implementation of strategies and techniques to minimize tax liability and preserve assets within the family.
There have been many proposed changes to tax laws and regulations. Planning ahead of these changes is crucial. President Obama’s proposed 2016 budget includes changes that would eliminate many strategies that could save significant taxes. These changes include:
- elimination of favorable tax treatment for Grantor Retained Annuity Trusts (GRATs) which are used to transfer family assets with minimized tax consequences;
- limitation on annual gifts excluded from the gift tax;
- reverting to a prior smaller exemption from estate tax (specifically, to 2009 when the estate tax exemption was only $3.5 million per person and lifetime gift exemptions were $1 million per person) and a return to the top estate tax rate of 45%;
- increasing the top capital gains tax rate to 28.5% (+3.8% surtax on investment income and 0.9% excess investment income tax).
- eliminating the “step up” in basis for appreciated assets at death.
While certain of the above proposals are unlikely to be approved by Congress, note that Congress frequently changes the rules. Recall, for example, the rush to estate planning at the end of 2012, when the exemption from estate tax was set to expire. In addition, Congress in recent years approved increases in capital gains tax rates, dividend tax rates and also implemented the 3.8% investment tax.
There are strategies that can be implemented before these changes are promulgated by the government. We can assist you in best anticipating the proposed changes and developing strategies to overcome the tax increases. Contact us for a confidential discussion.