estate - Linkenheimer LLP CPAs & Advisors

Age-Related Tax and Financial Milestones

In an era filled with uncertainty, you can count on one thing: time marches on! This article covers some important age-related tax and financial planning milestones that you should keep in mind for yourself and loved ones.

Ages 0–23

The so-called “Kiddie Tax” rules can potentially apply to your child’s (or grandchild’s) investment income until the year he or she reaches age 24. Specifically, a child’s investment income in excess of the applicable annual threshold is taxed at the parent’s marginal tax rate.

Note: For 2018 and 2019, the unfavorable income tax rates for trusts and estates were used to calculate the Kiddie Tax. Recent legislation changed this for 2020 by once again linking the child’s tax rate to the parent’s marginal tax rate. However, you may elect to apply this change to your 2018 and 2019 tax years. If we feel an election would be beneficial for 2018, we will recommend amending your return.

For 2020, the investment income threshold is $2,200. A child’s investment income below the threshold is usually taxed at benign rates (typically 0% for long-term capital gains and dividends and 0%, 10%, or 12% for ordinary investment income and short-term gains). Note […]

By Linkenheimer LLP|2020-09-03T20:03:17+00:00February 28th, 2020|estate, irs, New Tax Laws, tax implications|0 Comments

Consider All the Tax Consequences Before Making Gifts to Loved Ones

Many people choose to pass assets to the next generation during life, whether to reduce the size of their taxable estate, to help out family members or simply to see their loved ones enjoy the gifts. If you’re considering lifetime gifts, be aware that which assets you give can produce substantially different tax consequences.

Multiple types of taxes

Federal gift and estate taxes generally apply at a rate of 40% to transfers in excess of your available gift and estate tax exemption. Under the Tax Cuts and Jobs Act, the exemption has approximately doubled through 2025. For 2018, it’s $11.18 million (twice that for married couples with proper estate planning strategies in place).

Even if your estate isn’t large enough for gift and estate taxes to currently be a concern, there are income tax consequences to consider. Plus, the gift and estate tax exemption is scheduled to drop back to an inflation-adjusted $5 million in 2026.

By Linkenheimer LLP|2018-10-16T14:35:54+00:00October 16th, 2018|estate, estate tax, gift tax, income tax, New Tax Laws|0 Comments

An FLP Can Save Tax in a Family Business Succession

One of the biggest concerns for family business owners is succession planning — transferring ownership and control of the company to the next generation. Often, the best time tax-wise to start transferring ownership is long before the owner is ready to give up control of the business.

A family limited partnership (FLP) can help owners enjoy the tax benefits of gradually transferring ownership yet allow them to retain control of the business.

How it works

To establish an FLP, you transfer your ownership interests to a partnership in exchange for both general and limited partnership interests. You then transfer limited partnership interests to your children.

You retain the general partnership interest, which may be as little as 1% of the assets. But as general partner, you can still run day-to-day operations and make business decisions.

Tax benefits

As you transfer the FLP […]

By Linkenheimer LLP|2020-09-03T20:04:30+00:00August 13th, 2018|child, estate, New Tax Laws, small business, succession planning, tax planning|0 Comments

The Tax Impact of the TCJA on Estate Planning

The massive changes the Tax Cuts and Jobs Act (TCJA) made to income taxes have garnered the most attention. But the new law also made major changes to gift and estate taxes. While the TCJA didn’t repeal these taxes, it did significantly reduce the number of taxpayers who’ll be subject to them, at least for the next several years. Nevertheless, factoring taxes into your estate planning is still important.

Exemption increases

The TCJA more than doubles the combined gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption, from $5.49 million for 2017 to $11.18 million for 2018.

This amount will continue to be annually adjusted for inflation through 2025. Absent further congressional action, however, the exemptions will revert to their 2017 levels (adjusted for inflation) for 2026 and beyond.

The rate for all three taxes remains at 40% — only three percentage points higher than the top income tax rate.

The impact

Even before the TCJA, the vast majority of taxpayers didn’t have to worry about federal gift and estate taxes. While the TCJA protects even more taxpayers from these taxes, those with estates in the roughly $6 million to $11 million range (twice that for married […]

By Linkenheimer LLP|2018-06-13T17:16:53+00:00June 13th, 2018|estate, New Tax Laws, tax implications|0 Comments

IRS Automatically Extends Filing for Certain Estates Electing Portability

In estate planning, the concept of “portability” of a deceased spouse’s unused exclusion (DSUE) amount is relatively new. For decedents dying after December 31, 2010, if a first-to-die spouse has not fully used the estate tax exclusion, the DSUE amount can be transferred to the surviving spouse. This was originally passed as a two-year temporary provision until it was made permanent in the American Taxpayer Relief Act of 2012. Estate tax returns are usually required to be filed within 9 months of death to make the deceased spousal unused exclusion election. The IRS released Revenue Procedure 2014-18, providing an automatic extension for certain estates of decedents dying in 2011, 2012 and 2013 to elect portability. The extension applies to estates that would otherwise not have had a filing requirement, and allows the estates to file a return to elect portability until December 31, 2014. It includes the estates of same-sex decedents who were not eligible to elect portability until after the Windsor decision (United States v. Windsor recognized same-sex marriages for purposes of determining marital status of taxpayers under the Internal Revenue Code, the IRS has issued Revenue Procedure 2014-18 to grant limited relief for late elections).

This revenue procedure applies only […]

By Linkenheimer LLP|2020-09-03T20:05:44+00:00October 28th, 2014|estate, extension, tax|0 Comments