Tax Planning

Taxes can disrupt your Retirement Success™ from numerous directions – Estate, Inheritance, Income, Capital Gains can all erode or destroy your planning. There are many “optional taxes” that can be eliminated, avoided or reduced. (The difference between tax avoidance, and tax evasion, is 20 years).

We can help guide you to strategies that have saved our clients millions of dollars, that coordinate with the legal, health and financial issues you may be facing now or in the future.

Gift or Sell the House?

We are often asked, “should I put my house in my child’s name” – or “should my parent put my house in my name?” – and we always ask, “Why?”
If the answer is to avoid probate, we have techniques that work far better.
If the answer is asset protection….we also have techniques that work far better.

There is in general a “tug of war” between gifting and bequesting.  It’s great to give a gift, and see the recipient appreciate and enjoy the gift.  BUT, unnecessary taxes are not so great.

Here’s a simple example:  If you pay $100,000 for your home, and it is worth $200,000 and you have lived there for a few years, you can sell that house and avoid ANY tax on the gain – yet, if you give the house to your child, and they then sell it for $200,000, they will have a PROFIT for which tax will be owed.

Similar issues can apply with other assets.  We need to speak and discuss what strategies make the most sense to accomplish your goals, while disinheriting our least favorite uncle as much as possible.

IRAs - draw down now or later?

This text is being written October, 2020 and will have to be changed shortly.  But in the meantime….
We are facing yet ANOTHER polarizing election.  In an attempt to be non-political (when discussing politics) we have to recognize the climate we are in.
We have TRILLIONS that went into Coronavirus relief packages.  And there’s BILLIONS more being talked about daily.
It seems inevitable, that:
1) if Trump wins, we would expect taxes to go up.
2) if Biden wins, we KNOW taxes will go up – HEAVILY.
So, how does that affect YOU?
EVERY dollar you take out of a traditional IRA or 401k gets taxed as if you earned it on your return for that year (except you don’t pay FICA or employment taxes on those dollars).  So if you withdraw $100,000 – you’ll essentially add $100,000 to your income for the year, and taxes will be owed as if you earned another $100,000.
BUT, what if we can spot opportunities for tax deductions – that might otherwise be lost?  In THAT case, if you have a way to deduct $100,000 for example, and then you incur an EXTRA $100,000 income, the two can wash out.
But what happens if we DON’T have magical deductions in a given year (or more to the point, 2020?) – MIGHT it be wise to take some IRA withdrawals now, in anticipation of higher taxes next year or beyond?
Those are the difficult types of questions we explore and model to determine how reactive, or proactive to be with IRA withdrawals.  There is often no easy answer, and it can take much modeling, calculations and decisions to formulate recommended courses of action.

Medical Deductions

When you have significant unreimbursed medical expenses, you can often deduct them from your taxes.  Many accountants miss this critical planning strategy.  Coupled with withdrawals from IRAs or 401ks we can minimize or at times eliminate unnecessary taxes, or take additional withdrawals strategically to take advantage of medical or other deductions.

Predictive Tax Optimization Planning™ (PTOP)

With our Predictive Tax Optimization Planning™ (PTOP™) Process, we may proactively accelerate (or reduce) IRA, 401k, or other qualified fund withdrawals to reduce taxes, whether now, in the future, for the elder, or for the beneficiary – and when appropriate we can often engage in “bracket riding” – where we will push taxes out to those in lower brackets. 

Depending upon the situation, this can result in savings of HUNDREDS OF THOUSANDS OF DOLLARS! 

We can also help to avoid “Optional taxes.”

If you think the Government will give you advice on how to save taxes, well, they won’t.  They’ll happily accept your overpayments and without decent counsel you won’t realize you have, or may have been about to, pay unnecessary taxes.

The difference between tax avoidance (which is fine) and tax evasion (which is NOT fine) is….20 years.  Our team acts within the confines of the law, reducing or eliminating your tax liability safely, and as aggressively as the law will allow.  Our accounting colleagues can often spot and fix mistakes made by other accountants.

Estate Tax Planning

Historically speaking, the federal estate tax is an excise tax levied on the transfer of a person’s assets after death. In actuality, it is neither a death tax nor an inheritance tax, but more accurately a transfer tax. There are three distinct aspects to federal estate taxes that comprise what is called the Unified Transfer Tax: Estate Taxes, Gift Taxes, and Generation-Skipping Transfer Taxes. Legal planning to avoid or minimize federal estate taxes is both a prudent and an important aspect of comprehensive estate planning.

The most recent iteration of the federal estate tax was signed into law on January 2, 2013, as part of the American Taxpayer Relief Act of 2012 (ATRA 2012). There are a few things you ought to know about this law, as regarding your estate planning. Specifically, you should know the “numbers” governing transfers subject to estate, gift and generation-skipping transfer taxation.

Federal Estate Tax Exemption

The $5 million exemption signed into law on December 17, 2010, under the Tax Relief, Unemployment Insurance Authorization, and Job Creation Act of 2010 (TRA 2010), is now permanent under ATRA 2012, as indexed for inflation. Accordingly, the federal estate tax exemption for 2013 was $5.25 million, 2014 was $5.34 million, 2015 was $5.43 and for 2016 is $5.45 million, thanks to that inflation indexing (and a nearly “automatic”* $10.9 million for married couples who follow very specific requirements at the death of the first spouse).

Annual Gift Tax Exclusion and Lifetime Gift Tax Exemption

The ATRA 2012 continues the concept of a unified exemption that ties together the gift tax and the estate tax. This means that, to the extent you utilize your lifetime gift tax exemption while living, your federal estate tax exemption at death will be reduced accordingly. Your unified lifetime gift and estate tax exemption in 2016 is $5.45 million, as indexed for inflation up from $5.43 million in 2015. Likewise, the top tax rate is 40%. Note: Gifts made within your annual gift exclusion amount do not count against your unified lifetime gift and estate tax exemption.

The annual gift exclusion is currently $14,000 for 2016, just as it was for 2013, 2014 and 2015. Married couples can combine their annual gift exclusion amounts to make tax-exempt gifts totaling $28,000 to as many individuals as they choose each year, whether both spouses contribute equally, or if the entire gift comes from one spouse. In the latter instance, the couple must file an IRS Form 709 Gift Tax return and elect “gift-splitting” for the tax year in which such gift was made.

Generation-Skipping Transfer Tax Exemption

The amount that can escape federal estate taxation between generations, otherwise known as the Generation-Skipping Transfer Tax Exemption (GSTT) is unified with the federal estate tax exemption and the lifetime gift tax exemption at $5.45 million, as indexed for inflation up from $5.43 in 2015. As with estate and gift taxes, the top tax rate is 40%.

So, what is this GSTT? Basically, it is a transfer tax on property passing from one generation to another generation that is two or more generational levels below the transferring generation. For instance, a transfer from a grandparent to a grandchild or from an individual to another unrelated individual who is more than 37.5 years younger than the transferor.
Properly done, this can transfer significant wealth between generations.


The ATRA 2012, makes “permanent” a new concept in estate planning for married couples, ostensibly rendering traditional estate tax planning unnecessary. This concept, called “portability,” means that a surviving spouse can essentially inherit the estate tax exemption of the deceased spouse without use of “A-B Trust” planning. As with most tax laws, however, the devil is in the details. For example, unless the surviving spouse files a timely (within nine months of death) Form 709 Estate Tax Return and complies with other requirements, the portability may be unavailable.

In addition, married couples will not be able to use the GSTT exemptions of both spouses if they elect to use “portability” as the means to secure their respective estate tax exemptions. Furthermore, reliance on “portability” in the context of blended families may result in unintentional disinheritances and other unpleasant consequences.

If you are concerned about how your current estate and gift planning may function in light of ATRA 2012, and thereafter, then we encourage you to schedule a consultation.

New Jersey Estate Taxes

New Jersey’s estate tax system is commonly referred to as a “pick up” tax. This is because New Jersey picks up all or a portion of the credit for state death taxes allowed on the federal estate tax return (federal form 706 or 706NA). Since there is no longer a federal credit for state estate taxes on the federal estate tax return, there is no longer basis for the New Jersey estate tax. New Jersey has neither an estate tax – a tax paid by the estate, nor an inheritance tax – a tax paid by a recipient of a gift from an estate.

Tax Minimization Strategies

People like to “save on taxes.”  But, where are these taxes coming from?
1) The Estate Tax – At the moment, with an $11.58 MILLION DOLLAR exemption PER PERSON most individuals and couples DO NOT have some $23,000,000 so estate taxes, at the moment, should not be a huge concern for most families (but we have some families who are affected, and we help them too!).
2) Gift Tax – presently tied into the estate tax exemptions, not a concern for MOST families.  And yes, that includes the questions when folks ask about $10,000 per year, or the current $15,000 per year.  When you gift in EXCESS of the present $15,000 per year, you are removing that surplus amount from your gift tax exemption.  So, you are “allowed” to gift $15,000 to an individual without a penalty.  If you gift $25,000 to that individual, you are then “using up” $10,000 from your $11.58MM exemption.  If that is a concern, we need to talk.
3) Inheritance Tax – New Jersey, and some other states, have an inheritance tax – where a tax may be owed based on the relationship of the beneficiary to the decedent.  NOTE, it doesn’t matter where the BENEFICIARY lives, it matters where the DECEDENT was domiciled (lived).  There is NO New Jersey inheritance tax for assets left to a spouse, civil union partner, parent, grandparent, child, or grandchild.
4) Income Tax – this is a big one.  IRA and 401k distributions, parts of social security, pensions, dividends, etc.  We can help minimize income tax with proactive planning.
5) Capital Gains Tax – this might be obvious to some (sell a stock for a profit, pay capital gains) – but what about a house that would have been exempt from capital gains taxes that is GIVEN to a child or someone else – and now we have a profit on the sale?
Our Tax Minimization Strategies first explore what YOU want to accomplish.  THEN we consider all the above, and far more, to formulate and effectuate a strategy to accomplish what you want with minimal taxes.  NOTE:  Sometimes to accomplish what you want, there WILL have to be taxes paid.  We say, “Don’t let the tax tail wag the estate planning (and elder planning) dog.”  What that means, again, is let’s see what you want to do, then we’ll have show you how we can minimize the tax aspects to make that happen.

Avoiding Optional Taxes in Retirement

Coming Soon!

Income Tax Planning

Coming Soon!

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