Though tax reform was signed into law late last year, there are still numerous tax obligations to be met, and minimized, if at all possible. The estate tax, or “death tax,” as it is colloquially known, is a tax on inherited wealth. You have options, even if estate tax reform is a little slow in coming.
You can give up to $14000 annually as gift. You can also contribute to 529 plans, and that wealth grows tax-free. There is a lifetime exemption of 5.49 million dollars, and that’s an effective way to transfer some familial wealth, through a trust. Some people may want to do this without using the lifetime exemption, so there are other products to accomplish it. A GRAT is a loan of investment assets, the original amount of which can be paid back over a number of years. If it grows above that original amount, that wealth is tax-free.
You might consider a Family Limited Partnership. Though there are some limitations to how and to whom family wealth in a business can be transferred, this is a way to protect those assets earned from a family business.
Tennessee is one of three states that allows an out-of-state spouse to set up a trust for property that was owned jointly. It is considered “community property,” and thus, tax-free, at least in regard to capital gains tax from future sales. Anything in a charitable remainder trust, or CRT, is exempt from taxation because the beneficiaries are non-profit organizations, up to and including family foundations.
These, and various other planning strategies, help you meet your obligations, while keeping wealth that you earned so that it can be transferred inter-generationally. When we talk about leaving our children and grandchildren better off than we are, these strategies are some of the practical ways that can happen. If you have questions about these products or strategies, or you need a qualified Tennessee tax attorney, call Burkhalter & Burkhalter for a free consultation.