Senator Russell B. Long once noted that a tax loophole is “something that benefits the other guy. If it benefits you, it is tax reform.” At Palmer & Slay PLLC, we tend to agree. We work hard to reduce the estate taxes paid by families in the Brandon, Mississippi area not by finding loopholes, but by crafting smart solutions that take full advantage of the law. Below are 3 tactics we commonly employ on behalf of our high-net-worth clients.
1. Get Gifting
Federal law includes an annual gift tax exclusion, which allows an individual to pass up to $15,000 per person, to as many individuals as one would like, each year, tax-free. Consistently taking advantage of this law helps families pass a significant amount of wealth on to the next generation without worrying about taxes.
Individuals who are worried about what might happen if they give certain family members $15,000 every year for the next few years, or who would like to gift to a minor, can set up a trust.
Gifting has the added benefit of allowing families to openly discuss their estate plan, as well as their hopes and dreams for the next generation. This is a difficult topic to broach under the best of circumstances, but it is incredibly important to prepare loved ones for what to expect in the future.
2. Step Right Up
Clients that own assets which have greatly appreciated in value, and would be hit with a large capital gains tax bill if they sold them, may want to consider holding on to those assets until after their death.
Assets that are passed upon the original owner’s death get a step up in basis on the date of death. The person who inherits them can then turn around and sell them without paying the high capital gains tax the original owner would have been forced to pay.
3. Invest In Life Insurance
Purchasing life insurance through an irrevocable life insurance trust (ILIT) can help high-net-worth individuals pass a significant amount of money to their heirs tax-free. If done correctly, the policy proceeds bypass the estate and go directly to beneficiaries.
It is important to note that ILITs only work as intended if the creator lives more than three years after the date of their creation. This is another reason why it is important to do estate planning earlier in life. Delay can cause assets to be pulled back into the estate and taxed.
Consult With a High-Net-Worth Estate Planning Lawyer
The most important thing you can do to reduce your estate tax burden is work with an experienced attorney to craft a custom estate plan. At Palmer & Slay, PLLC, we provide skilled legal counsel for high-net-worth clients in the Brandon, Mississippi area and beyond.
We appreciate that avoiding taxes is not just about sticking it to Uncle Sam. It is about leaving a legacy for future generations and respecting the hard work you have done to get where you are today. If you are ready to speak with someone about your estate planning needs, we are ready to listen. Please contact us today to schedule an initial consultation.