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By David L. Moore, CPA
Midyear Tax Planning Ideas
Tax planning is a year-round process, so now is a good time to think about the following:
Are you considering making a cash gift to a relative? If so, consider making the gift in conjunction with the overall revamping of your stocks and mutual funds held in taxable brokerage accounts to achieve better tax results. Don?t gift loser shares (currently worth less than you paid for them). Instead, sell these shares, recognize the capital loss on your tax return, and then gift the cash proceeds to a relative. However, do gift winner shares to lower tax bracket relatives (unless they are under age 24 and subject to the Kiddie Tax). The 2014 annual gift tax exclusion is $14,000.
Are you considering making a contribution to a favorite charity? The previous strategies will also work well for contributions to qualified charities. Sell loser shares, recognize the loss on your tax return, and then give the cash proceeds to the charity and claim the resulting charitable contribution (if you itemize). Donate winner shares to the charity and deduct the full current fair market value at the time of the gift (without being taxed on the capital gain). The tax-exempt organization can sell your donated shares without owing tax.
Are you self-employed? Consider employing your child in the business (but pay a reasonable wage for their age and work skills). This practice can shift income (which is not subject to the Kiddie Tax) to the child who is normally in a lower tax bracket, decrease payroll taxes, and enable the child to contribute to an IRA.
Is your estate plan current? If you already have an estate plan, it may need updating to reflect the current estate and gift tax rules. For 2014, the unified federal gift and estate tax exemption is a generous $5.34 million, and the rate is 40%. Furthermore, the impact of the Supreme Court?s Windsor decision and resulting IRS changes in the federal definition of marriage mean that legally married same-sex couples need to revise their estate plan. Plus, there may be nontax reasons to update your estate plan.
Please contact us to discuss any tax planning strategies you are interested in implementing.
Photo © nyul – Fotolia.com
Courtesy David L. Moore CPA, LLC
351 S. Cypress Road, Suite 404 C
By Kathleen Moore
It happens all too frequently — a person passes away without having his or her estate documents in place and up to date. The consequences of this scenario are felt in time, money and aggravation.
A woman is diagnosed with pancreatic cancer; however, her estate documents are prepared and up to date so her estate is settled quickly upon her death. Tragically, her husband passes away unexpectedly a year later. Unfortunately, he had never prepared his estate documents! Several years and several lawsuits later, his estate is finally settled.
One partner of an unmarried couple is diagnosed with cancer. Unfortunately his treatment is unsuccessful and he now faces the daunting task of planning for his estate, as well as succession planning for his business. His goals are clear; he wants everything to go to his partner and he wants her to continue to run his business. However, he is afraid other family members will try to thwart his wishes.
A young woman begins a new job and transfers all of her retirement funds into a new 401K. Unfortunately, she does not name a beneficiary on this new 401K. When she passes away a short while later, her family has differing ideas about how the proceeds should be divided.
In all of the above cases, an event should have triggered a review of the person’s estate planning. And in each case, the results of settling his or her estate probably did not accurately reflect the wishes of the deceased.
Some areas to pay particular attention are listed below:
Decide to Act. The first step is knowing an estate plan is needed and deciding to do so. Act now to make sure your wishes will be known and acted upon.
List Your Beneficiaries. Make a list of family, friends and charities to whom you might consider leaving property as part of your estate. Your plan should address who you wish to receive your property and when you want them to get it, plus list any specific gifts to each person.
List Your Assets and Liabilities. Make a list of all the money, accounts and property you own. Write down whether it is held in your name only or is jointly held with someone else. Collect important documents, such as stocks, bonds, insurance policies, bank account statements and the locations of your bank accounts.
Review Prior Plans. If you already have an estate plan, determine if your wishes have changed over time. Marriage, divorce, remarriage, birth or adoption of children, moving to another state, changes in your circumstances or changes in tax laws may make it necessary to update your estate plan. Collect any prior wills or estate plans and review them. Review your beneficiary designation on all applicable accounts.
Discuss Your Plans. Let your family know about your desires for end of life decisions. Someone you trust should also be informed where your estate plan documents are kept, so they can be located when needed.
By taking these steps you can develop your estate plan and keep it up to date, which will provide you peace of mind, assure that your wishes are acted upon and help provide for your loved ones when you are no longer here.Photo credit: © nicolasjoseschirado – fotolia.com
Courtesy Law Offices of Kathleen M. Moore, LLC • 351 S. Cypress Road, Suite 404B• Pompano Beach, Florida 33060
(954) 366-3694 • www.kmoorelaw.com