Do Your Planning Now Top 10 reasons to move all necessary assets out of your clients’ taxable estates ASAP
Key Takeaways
by Tim Voorhees
• Clients can ”eat better“ by minimizing taxes, but they can also ”sleep better“ knowing that irrevocable trusts protect assets from lawsuits.
We learned on January 2, more than a day after the gift and estate exemptions returned to $1 million, that both of these exemptions are increasing to $5
• Popular estate planning tools such as IDITs, QPRTs, GRATs and LLCs may be limited by lawmakers in the future. Put these tools in place now to reduce taxes. They’ll likely be protected by grandfather provisions if Congress later changes the rules. •”Purpose statements“ and ”family meetings“ can be very helpful for preparing heirs and assets they’re slated to receive.
the strong desire of policy makers to keep the gift exemption tax low and to discourage wealthy people from moving money to taxpayers in lower tax brackets. In fact, if you did not encourage clients to move all necessary assets out of their taxable estates last year, you should consider doing so now. Top 10 reasons to consider moving assets For many reasons it made sense to move assets to irrevocable trusts last year even while the law was uncertain. And here are 10 reasons to consider doing so now: 1. Clients can grow assets outside taxable estates. Under the new tax law, clients can avoid a 40 percent estate tax by moving assets to irrevocable trusts. 2. Clients can lock in this year’s $5 million+ exemption. Because Congress normally grandfathers tax planning made under the current tax laws, gifts sheltered with the current exemption should be secure in case future tax increases lower the exemption again. 3. Planning tools can be secure even if Congress follows through on threats Congress has talked often about raising revenue by minimizing the use of common estate planning tools such as IDITs, QPRTs, GRATs, LLCs and others discussed in the book available at www.ZeroTaxCounsel.com. If you put these tools in place now to reduce taxes, they should be protected by grandfather provisions if Congress later changes the tools. 4. The irrevocable trust planning provides asset protection ben Clients can ”eat better“ by minimizing taxes, but they can also ”sleep better“ knowing that irrevocable trusts protect assets from lawsuits. 5. Irrevocable trust planning encourages wise life planning. Trusts need purpose statements. Crafting purpose statements for trusts often stimulates discussion about the purposes and mission of people who fund the trust and purpose often achieve much greater success. (For information about the power
of purpose, download the free book from www.Legacies.info.) Managing assets in trusts often fosters commitment to family meetings. Such meetings can prepare children and grandchildren to steward assets wisely while they progressively assume more management, control and ownership responsibilities.
About the Author Tim Voorhees, JD, MBA, is a principal partner at Matsen Voorhees Law in Costa Mesa, CA. As an estate planning attor-ney for over 35 years, Tim has helped clients save millions of dollars in taxes while transfer-ring their legacy to their fami-lies and favorite charities. His is described at www.ZeroTax-Counsel.com. Feel free to email Tim at tim@vfos.com.
7. Estate planning with irrevocable trusts can now be more powerful when combined with income tax planning. Under the new tax laws, clients powerful tools for tax-advantaged income can take advantage of the same types of irrevocable trusts used for estate planning. For more information about income tax planning instruments that generate secure lifetime income, see www.Telinsur.com. 8. Planning now starts the statute of limitations running. After clients make gifts, the IRS has three years to challenge the gifts. While the risk is usually very small, nobody wants to live with this risk during retirement years. Clients should make gifts now while they have an able team of advisers who can implement and defend the transactions. ure. Many of the more powerful tax-deferred vehicles generate the most attractive returns if capital accumulates tax-free for at least 12 to 15 years. 10. Clients should act now while they are still of sound mind. Any one of us could be gone tomorrow. The possibility of new tax law changes should motivate us all to complete planning that might otherwise be left uncompleted Conclusion While there is still uncertainty about the new tax laws, the growing impact of taxes is certain. Fortunately, American public policy continues to encourage the
opportunities created by the 2013 tax legislation.
Matsen Voorhees Law LLP 695 Town Center Drive, 7th Floor, Costa Mesa, CA 92626 Phone: 800-447-7090 or 949-878-9400 • Fax: 866-447-7090 Email: info@MatsenVoorhees.com Readers of this document should consult with independent advisors regarding the tax, accounting and legal implications of the proposed strategies before any strategy is implemented. Nothing in this presentation is intended to offer securities or investment advice. Above numbers are based on a hypothetical fact pattern. Tax and regulatory rules affecting strategies in this document may change often and have varying interpretations. To ensure compliance with requirements imposed by the IRS under Circular 230, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or for promoting, marketing or recommending to another party any matters