As 2018 comes to a close, consider making year-end planning preparations. Taking the time to prepare before the year is over can provide tremendous value. The attorneys at Kelleher & Buckley, LLC have compiled their knowledge to present you with a list of some opportunities to consider. We can help and the holidays are a perfect time to discuss the following:
- Is it time for your parents and other elders to create or update their estate plans?
- Have you established powers of attorney for healthcare and property for adult college students?
- Have you created a trust-based estate plan to gain control over your property and assets?
- Will your parents or other elders eventually need to go into a nursing home? Have you considered Medicaid planning?
- Do you know what you have, how much you are worth and how your assets are titled? How about making a list of all your assets on an account-by-account, asset-by-asset and liability-by-liability basis?
- Have you considered implementing Spousal Lifetime Access Trusts (SLATs)? It’s a great way for married couples to use a portion or all your current exemptions before December 31, 2025 when such amounts revert to approximately $5.5 million. Currently the federal estate tax exclusion and generation-skipping tax exemption amounts are $11,180,000 per person in 2018, increasing to $11,400,000 in 2019.
- Children going to college? Do you know how to properly make gifts for educational purposes?
- Family members with medical or psychological needs? Do you know how to properly make gifts for medical purposes?
- Are you making annual exclusion gifts ($15,000 exemption in 2018 and 2019)?
- Do you know about Grantor Retained Annuity Trusts (GRATs)? Any assets placed under the trust pay out a yearly annuity. When the trust expires, the beneficiary receives the assets remaining in the GRAT tax-free.
- Have you reviewed your life insurance policies lately? Many people can save significant value by addressing underperforming and improperly designed life insurance policies.
- Do your mother and father have old and unnecessary life insurance policies? Selling or restructuring old life insurance policies can enhance cash flow and create pools of cash.
- Did you know that life insurance proceeds are generally taxable for estate tax purposes? Interested in learning how to make your life insurance totally tax-free?
- When was the last time you reviewed your life insurance beneficiaries? Are the correct trusts and people named as your beneficiaries?
Income Tax Planning
- Many taxpayers have traditionally accelerated personal income tax deduction before year end. Are you aware that is now the old rule? The new rule is to properly time personal income tax deductions due to new higher standard deductions and limits on itemized deductions.
- Have you considered Roth conversions? For lower- and middle-bracket income taxpayers, Roth conversions may be attractive.
- Have you contributed enough to your IRA this year? If you are a nonworking spouse, a $5,500 annual contribution to an IRA ($6,500 if over 50 years old) is allowed for 2018. Note that if the modified adjusted earned income is over $199,000 for 2018, such IRA contributions cannot be deducted, but they can be converted into a Roth IRA contribution.
- Are you going through a divorce? Consider that maintenance payments will generally no longer be deductible for income tax purposes as of January 1, 2019.
- Have you made any charitable donations? You may want to donate appreciated capital gain assets instead of cash, which could result in a larger deduction as well as an avoidance of the capital gains tax.
- Are you aware that the Alternative Minimum Tax (AMT) exemption amounts have increased ($70,300 for single taxpayers and $109,400 for married taxpayers filing jointly)?
- Have you thought about having your dependents filing their own tax returns? Not only will they be taxed at your rate, but their income is usually not included in your income, which will not affect your current tax bracket.
- Looking for a low-rate loan? The rates for intra-family loans vary monthly and are usually low.
- Do you properly conduct and document corporate or business decision-making meetings? Are important decisions being made by business decision-makers without the proper paperwork?
- Do you have copies of the physical stock certificates or operating agreement representing your business ownership? Unfortunately, many people do not, and this can cause unnecessary legal troubles.
- How will you buy out your fellow shareholders, members or partners if any one or more of you become mentally disabled or pass away? Do you have a shareholder’s agreement and buy-sell agreement in place? If so, when was the last time it was updated?
- Do you have noncompetition and other restrictive agreements with fellow business owners, key employees and salespersons?
- Are you aware of the Qualified Business Income Deduction available to many businesses? If so, did you know that implementing proper retirement planning can help attaining Qualified Business Income Deduction eligibility?
- Did you know that if your child inherits your IRA that such assets are generally subject to the child’s creditors? Did you know that if your child loses an inherited IRA to a creditor that your child may be subject to unexpected income taxation and lose tremendous income tax deferral? A Retirement Benefit Trust (RBT) can provide your beneficiaries with asset protection and help preserve income tax deferral value.
- When was the last time you reviewed your retirement plan beneficiary forms? Are the proper trusts and people named as your beneficiaries?
- Have you investigated your contribution opportunities for 401(k) or other Deferred Compensation Plans (403(b) and 457 plans)? The allowable contribution for 2018 is $18,500 and for those age 50 and older by December 31, 2018, an additional $6,000 “catch-up” contribution is permitted. For anyone self-employed, a SEP IRA allows for contributions beyond year-end 2018 up to $55,000 – an amount higher than allowed for 401(k) and other Deferred Compensation Plans.
- Have you established a 529 account? These accounts can be pre-funded and now be used for elementary and high school as well as higher-level learning; an excellent planning alternative if you are sending your children to private or parochial school. It’s great planning for grandchildren too!
- Do you know about education credits available to parents with college-aged dependents?
- Are you familiar with Qualified Opportunity Zones? For certain business and real estate owners, these allow you to take advantage of the opportunity to avoid 100% of the gain on a sale.
- Have you considered capital gain and loss harvesting? You may find yourself in a zero-percentage tax bracket for capital gain purposes. Furthermore, you can capture up to $3,000 of capital loss which can offset ordinary income.
Kelleher & Buckley, LLC can help you take advantage of the remaining weeks of 2018 and protect your estate and retirement nest egg. Please call 847-382-9130 to set up a free consultation with any one of our 20+ experienced attorneys.