As 2013 comes to a close, we wish to express our heartfelt appreciation for your interest in Amato Law this past year.
With the holiday season in full swing, most of you are likely keeping busy. Considering taxes or your estate may seem less important than sending cards, giving out invitations, picking out gifts, and, of course, thinking of resolutions for next year. But from an estate planning perspective, there are some key strategies that could make the coming year (and beyond) easier for both you and your loved ones. From donating to a beloved charity to gifting to your children or grandchildren, these ideas embody the spirit of giving while also giving you the best estate planning options.
Deferring income and accelerating deductions
As a rule, deferring income to the following year means you won’t have to pay taxes on it for a whole year. Similarly, taking on more deductions (by donating to a charity or increasing your retirement contributions) this year will lower your taxes. Of course, this assumes your income won’t be increasing dramatically next year; if that’s the case, you may want to take on the opposite approach, by deferring deductions and accelerating income.
It’s also important to keep in mind other big life changes or considerations that could impact you from a tax perspective. Are you supporting a parent, for example? Claiming a parent as a dependent may be an option. Be aware, too, of how much tax you’ve already paid this year, as it may not have been enough.
Sharing the wealth
Deferring income and accelerating deductions are a great way to minimize your taxes for 2014. But what about ways to make the most of your estate beyond the coming year? A smart way to reduce your estate tax bill is to donate money during your lifetime. Many naturally choose to give to their children or grandchildren. Per the IRS, an individual can give away $14,000 each year (or $28,000 if parents and grandparents choose to combine their amounts), without reducing their lifetime exclusion.
This can be a fraught situation if said children are still minors. However, there are many options that allow you to gift to your child while still retaining some control over the assets. An irrevocable trust is one such example; so is a Uniform Gifts to Minors Act (UGMA) or a Uniform Transfers to Minors Act (UTMA) account.
With 2013 coming to an end, we’d like to wish you and yours a wonderful New Year. As you plan for the coming year, these strategies may provide some concrete ways to ensure a prosperous and healthy future, both for 2014 and beyond.