July 10, 2015 HMA Website

The Tax Opportunity Window: It’s Open…But For How Long?

This edition of The Advantage addresses ways to reap the benefits of changes that will be occurring in tax laws over the next two years. It is possible to reduce your tax liabilities by simply transferring the executive operations of your business to the next generation. In the course of researching this topic, we came across an article by Gary Pittsford, the President and CEO of Castle Wealth Advisors, LLC, in which he explains several strategies that are important to consider if you are fortunate enough to have relatives to leave your business to and are interested in capital preservation for your family.

When Tax Laws change in 2013, Where Will You and Your Business Be?
Pittsford’s article examines upcoming changes in tax laws and lays out excellent strategies that will allow you to maximize the advantages you have right now.

Some of these changes include:

Income Taxes
Income taxes have been stable for a few years at a reduced rate, but there’s a good chance we’ll see a significant uptick in 2013 as the current tax laws expire. Coupled with surtaxes called for by the Obama health care plan, this could mean the top income tax rate will rise to over 43%.

Long-Term Capital Gains Taxes
In 2011, the capital gains tax is 15%. That stands to increase to 20% or more, plus surtaxes, in 2013. How you structure any upcoming sales will have major impact given this change.

The Gift Tax
Transferring assets to the next generation can help reduce your business’ tax burdens, if done correctly. We just saw a big jump in the size of a lifetime gift (from $1 million to $5 million) this past January. Using this gift tax now can help avoid future estate taxes, and there are some good ideas for how to make that happen.

Estate Tax & Trust Documents
In 2009, the estate tax exemption was $3.5 million. In 2010 it was $0. In 2011, it’s $5 million. In 2013, it could stay at $5 million, revert to $1 million, or morph to something altogether different. This is one area where it pays to know your options.

State Estate Tax and Inheritance Tax
The estate/inheritance tax landscape changes on a state-by-state and year-by-year basis. Since both federal and state laws have been a moving target in the last decade, it behooves you to have an expert review any trust documents to make sure that their provisions still fit your family’s needs.
These are just some of the challenges that will arise in tax planning between now and when the window closes 2013. To read the full article, or for more information about how you can work the current tax laws to your business’ benefit, and avoid paying the consequences or for more information about how you can work the current tax laws to your benefit click here or contact Paul Cooperstein at paul@marxgroupadvisors.com  or Gary Pittsford directly at gary@castle3.com.