POST ELECTION STRATEGY SELECTION – WHAT WE ARE TELLING OUR CLIENTS
WOW! THE REPUBLICAN AND DEMOCRATIC NATIONAL COMMITTEES: CO-
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POST ELECTION STRATEGY SELECTION– WHAT WE ARE TELLING OUR CLIENTS
The following is a client letter that we have sent out this week, and that you can feel free to adapt for your own client base, or simply forward this and ask them to call you with any questions –
We write this letter on the eve of President Obama’s re-
This makes for a very interesting playing field from the point of view of taxpayers who want to know what the situation is with respect to their income and estate tax planning.
On the income tax side, the significant increases already programmed into the law for January 1st may actually occur, and this will be a significant burden upon single individuals who earn more than $200,000 per year and married couples who earn more than $250,000 per year.
The tax increases include a highest bracket of 39.6% instead of the present 35%, and a 3.8% tax on interest, dividend, net rent, and other passive income to the extent that the taxpayer has total earnings exceeding the $200,000 and $250,000 thresholds above.
In the estate tax arena the chips are even higher, as the present $5,120,000 gifting and estate tax exemptions would go to $1,000,000 on January 1! This is why so many clients have been working with us to make gifts exceeding $1,000,000 in value to make use of all or part of the $5,120,000 temporary gifting allowance which may never exist again during our lifetimes. In addition to this the estate tax rate would go up to 55% – it is now at 35%.
Many clients do have a concern that if they gift too much away they could run out of assets. Popular solutions to this have been (1) have a spouse as a beneficiary of the trust and assume that as long as the spouse is alive the donor can derive indirect benefit by being supported by the spouse while the spouse is being supported by the trust, and (2) forming the trust in an asset protection jurisdiction, since the IRS has ruled in at least one case that the contributor can be a discretionary beneficiary and actually receive the benefit of trust assets if and when ever needed.
Hopefully there will be a compromise between now and year-
Last week we co-
Professor Hesch suggested that every affluent person should consider putting an irrevocable trust into place that can hold assets that would not be subject to federal estate tax, but would be considered as owned by the grantor for income tax purposes.
This is because two very important estate and gift tax loopholes that presently exist for these trusts would be eliminated if President Obama’s February 2012 budget suggestions are adopted, which are as follows:
1. Presently the grantor can pay the tax on dividends, interest and other income earned by such a trust, so that the trust can grow faster to increase the assets that would pass free of estate tax.
Under President Obama’s proposal this type of trust would be subject to estate tax on the death of the grantor. Professor Hesch observed that this type of trust existing before the end of this year would be grandfathered. The effect of being able to pay the income tax on behalf of this type of trust, and be able to sell assets or discounted family interests to this type of trust in exchange for a low interest note has an incredible mathematical value.
2. Presently this type of trust can be used to avoid estate tax not only at the grantor’s level, but also at the level of generations of descendants going for as long as 360 years if the trust is formed in Florida.
President Obama’s proposal would limit this “generation skipping dynasty” trust effect to 90 years.
In addition, many clients are making sure that they make their sales of family company interests to these types of trusts before year-
Fortunately for taxpayers we have a Republican House of Representatives who can hopefully resist having these new restrictive estate tax provisions enacted, but what will the trade-
Since the majority of super wealthy individuals have probably used their $5,120,000 gifting exemption in 2011 and 2012 we may not see significant resistance to allowing the gift tax exemption to go down to $1,000,000.
It is a stressful time for individuals who have a net worth of well over $1,000,000 and may find themselves in intensive care with their families wondering whether making it until after December 31, 2012 will cause significant additional estate tax. It is very sad to see that this situation that we have been fearing since December 2010 is now almost upon us.
So what are people to do between now and December 31, 2012?
If you fail to plan then you are planning to fail.
And, if In Doubt Gift It Out! –
Since that now seems unlikely it may be a good idea to complete normal 2012 year end gifting to make maximum use of the $13,000 per person annual exclusion.
Also, do not forget that the Obama budget proposals would largely curtail grantor retained annuity trust planning by requiring a minimum 10 year term and a positive remainder interest.
Please contact us if you have any questions or if we can be of assistance between now and year end, or in early 2013 for a planning update.
WOW! THE REPUBLICAN AND DEMOCRATIC
NATIONAL COMMITTEES: CO-
One recent case out of United States Court of Appeals Fifth Circuit,Janvey v. Democratic Senatorial Campaign Committee, et al., caught our eye. Sir Allen Stanford, also known as “Sir Scam-
While running the scheme, Stanford donated at least $1.6 million worth of Ponzi scheme proceeds to the RNC and DNC. Presumably, the funds were an attempt to curry political favor. Following Sir Scam-
The big lesson from Stanford is to never accept gifts from strangers, particularly if they are running a Ponzi scheme.
In addition, we feel that it should be pointed out that both parties knew, at least after the fact (and maybe even earlier), that Stanford’s donations were stolen directly from hardworking Americans and had to be sued to get the money back. It is hard to believe that this can happen.
This case also raises an important question: Why doesn’t the Patriot Act apply to large political party donations?
APPLICABLE FEDERAL RATES
To view a chart of this month, last month’s, and the preceding month’s Applicable Federal Rates, because for a sale you can use the lowest of the 3 please click here.
NEWS AND UPCOMING EVENTS
TUESDAY, DECEMBER 4, 2012 12:30 – 1:30 pm
Pension actuary Jim Feutz will join Alan Gassman for a webinar on Update of Pension, Labor and Tax Laws, Including 2012 Law Changes and Anticipate Changes for 2013. This webinar qualifies for 1 hour of continuing education credit. To register for the webinar please click here.
TUESDAY, DECEMBER 4, 2012, 5:30 – 6:00 pm
Alan S. Gassman will be joined by health care attorney Lester Perling to speak on What Physicians Need to Know About “Excluded Persons” and How to Make Sure You Do Not Have One. To register for the webinar please click here.
WEDNESDAY, DECEMBER 5, 12:30 –
The Whistleblower Threat: Do You Have It and What Can You Do About It? Lester Perling, J.D., M.H.A. and Alan S. Gassman, J.D., LL.M. will be presenting a webinar on the whistleblower threat. To register for the webinar please click here.
WEDNESDAY, DECEMBER 5, 5:00 –
An Overview of a Professional Job Search Process with Darry Griffs. To register for the webinar please click here.
Christopher Denicolo, J.D., LL.M. is a partner at the Clearwater, Florida law firm of Gassman, Crotty & Denicolo, P.A., where he practices in the areas of estate tax and trust planning, taxation, physician representation, and corporate and business law. He has co-
Kenneth J. Crotty, J.D., LL.M., is a partner at the Clearwater, Florida law firm of Gassman, Crotty & Denicolo, P.A., where he practices in the areas of estate tax and trust planning, taxation, physician representation, and corporate and business law. Mr. Crotty has co-
Thank you to our law clerks that assisted us in preparing this report:
Kacie Hohnadell is a third-
Alexandra Fugate earned her B.A. in English from the University of Florida in 2008, and J.D. from Stetson University College of Law in 2012. She has been a Guardian ad Litem for the past two years, a judicial intern for the Twelfth Circuit in Bradenton, and was recently admitted to the Florida Bar. She wants to pursue a career in business, employment, and labor law. Her email is Alexandra@gassmanpa.com
Eric Moody is a third-