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High-Net-Worth Planning for 2015

Posted on: January 29th, 2015
wealth managementWhile changes in tax laws can affect investment goals of high-net-worth individuals and families, strategic planning can help to mitigate tax burdens. Here are a few ways to maximize wealth transfers in the New Year: 
  1. Charitable giving. Wealth analysts reported increases in charitable giving trends among the wealthy, and forecasts show charitable contributions will continue to rise. Strategic charitable giving provides significant tax breaks while at the same time helping an individual to satisfy his or her goals for distributing assets. CRTs (charitable remainder trusts) in particular allow the donor to receive income tax deductions for gifts made to the trust during the donor’s lifetime, provide income to the donor or individual beneficiary for a specific period of time, and allow for an estate tax deduction when the term of the trust is over and the designated charity (or charities) receive trust assets.
  2. Tax optimization. Maximizing tax-deferred growth helps to build wealth over one’s lifetime, while minimizing income tax helps to accelerate this growth. IOVAs (investment-only variable annuities) are planning tools that can be structured with trusts; IOVAs manage how and when income tax is paid. Not all trusts qualify. A tax attorney can advise how to tax-optimize existing trusts or if new trusts should be created.
  3. Estate plan. Wealth Management reported that, as of 2013, nearly three-fourths of the high-net-worth households in the United States did not have a comprehensive estate plan in place. Without a proper estate plan, a decedent’s estate could be subject to significant estate tax – depleting assets that could have been shielded from tax and transferred to loved ones. The current federal estate tax exemption is $5.43 million; a 40% estate tax rate applies to the value of estates that exceeds this exemption amount. Married couples who elect portability enjoy double the exemption, considerably minimizing the tax burden on their estate and preserving assets.
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