Wednesday, August 24, 2011
Some Tax Saving Strategies from the Wall Street Journal
Income, estate,
and other federal tax levies have commonly been a bone of contention between
those with different political ideologies; but the current conflict has reached
unusual heights, with various million- and billionaires publicly expressing
their views (pro or against) about current tax laws. Of course, million- or
billionaires aren’t the only ones with strong opinions about taxes.
If you feel
that you pay too much in taxes, Brett Arends of the Wall Street Journal has some
tips to help you save on taxes in the future. Much of his article is
tongue-in-cheek, but the suggestions are valuable ones. Of special interest to
our firm and our clients are four of the tips nestled in the middle of the
article:
Give to your family. “Until the end of 2012 you can give
$5 million, tax-free... In addition you can give $13,000 a year to each
recipient -- each child or grandchild -- and a spouse can do the same. So a
married couple with, say, three children and eight grandchildren can give another
$286,000 a year, on top of that one-off $10 million. Over ten or twenty years
that really adds up.”
Put your grandkids—and great grandkids—through
college. “Money paid
directly to schools or colleges escapes estate taxes.” Furthermore, if you
contribute to a 529 educational savings account that money can be tucked away—and
eventually used by the student for whom it is intended—tax free (so long as it
is used for educational purposes.)
Buy life insurance. Proceeds from a life insurance
policy can go to your beneficiaries tax-free upon your death, although you may
have to make some arrangements ahead of time.
The article states that “Typically you put the policy in an Irrevocable
Life Insurance Trust... The premiums that you pay annually are gifts to the beneficiaries...
And when you die, the proceeds of the policy go to the trust, for the beneficiaries,
free of estate tax.”
Talk to an estate planner. “There are other moves that can cut
your estate tax, too. A Qualified Personal Residence Trust can slash the estate
taxes on a residence. A Grantor Retained Annuity Trust, or GRAT, can slash them
on an investment portfolio. So, too, can setting up a Family Limited
Partnership. Financial planners say this is a great time to put investments --
like stock -- into a GRAT.”
If you have
questions about these tax-saving strategies, or other strategies that can help
you preserve your estate for your heirs, please contact our office. We can help
you determine what your best options
are to help protect your assets—and your family—in the years to come.