It appears more likely than not the United States is headed\ntowards a split government next year. For purposes of tax planning next year,\nwe can probably assume that control of Congress is divided between Republicans\nand Democrats and we have a Democratic President. This result should mitigate some\nof our clients\u2019 fears, i.e., tax increases, a drastic reduction of the current\nestate tax exemption amount (\u201cETEA\u201d). <\/p>\n\n\n\n
Some tax strategies that we recommend including gifting through a SLAT and residency planning:<\/p>\n\n\n\n
1. The feared estate tax increase has likely been deferred. <\/p>\n\n\n\n
The ETEA, absent a subsequent change in law, will sunset on\nDecember 31, 2025, and will reduce to $5 million, adjusted for inflation. With\na split government, the risk of a major near-term reduction of the ETEA is low.\n However, the risk of a major medium-term\nreduction of the ETEA is higher over the next few years.<\/p>\n\n\n\n
If the change does occur, it could likely eliminate over\n$6.58 million of ETEA available for sheltering the transfer of wealth on an\nestate tax-free basis. For this reason, a Spousal Lifetime Access Trusts\n(\u201cSLATs\u201d) remain an excellent option for many clients. At its most basic, a\nSLAT is a gift from one the donor spouse to an irrevocable trust for the\nbenefit of the beneficiary spouse and children. The beneficiary spouse can\nreceive distributions from the SLAT, but the SLAT is designed to be excluded\nfor the beneficiary spouse\u2019s \u201cgross estate\u201d and is not subject to estate tax\nwhen the beneficiary spouse dies. SLATs are popular amongst married couples\nbecause the SLAT property remains accessible to the donor spouse through their\nspouse as beneficiary. Typically, the surviving spouse is the Trustee with the\nability to distribute trust principal to himself or herself for their \u201chealth,\neducation, support and maintenance.\u201d Upon the death of the beneficiary spouse,\nthe assets remaining in the SLAT pass to the children free of estate tax. <\/p>\n\n\n\n
2. Consider your domicile. The pandemic has shown the ease\nat which the workforce can transition to a full work from home capacity. This\nenvironment presents the opportunity for certain clients to legally change\ntheir domicile to a lower tax jurisdiction. Many clients who had second homes left\ntheir urban office and worked through the pandemic at their lake or vacation\nhome. <\/p>\n\n\n\n
For some clients, a change in state domicile may be a viable\nalternative to lower the overall tax burden faced. In changing domicile care\nmust be cautiously taken as each state has its own intent driven indicators\nsuch as length of time, voter registration, driver\u2019s license, etc. States have\nalso taken a more aggressive stance because of lost tax revenue. With our\nFlorida office (see https:\/\/flresidency.com<\/a>),\nwe often can guide a client through the process and build up a defense to a\npossible state income tax audit. <\/p>\n\n\n\n In summary, there is no time like the present to utilize\nthese https:\/\/flresidency.com\/. SLATs and other smart gifting strategies are\nfreeze techniques where the client is ensuring future appreciation of the\nassets are not taxed in the client\u2019s estate. Likewise, domicile calculations\nare based upon days present in each state. While the full results of the United\nStates election will not be known until early January, we recommend clients\nthink about tax strategies for 2021 now.<\/p>\n","protected":false},"excerpt":{"rendered":" It appears more likely than not the United States is headed towards a split government next year. For purposes of tax planning next year, we can probably assume that control of Congress is divided between Republicans and Democrats and we have a Democratic President. This result should mitigate some of our clients\u2019 fears, i.e., tax […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_daextam_enable_autolinks":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3778","post","type-post","status-publish","format-standard","hentry","category-planning-for-tax-minimization"],"_links":{"self":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts\/3778","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/comments?post=3778"}],"version-history":[{"count":2,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts\/3778\/revisions"}],"predecessor-version":[{"id":3795,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts\/3778\/revisions\/3795"}],"wp:attachment":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/media?parent=3778"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/categories?post=3778"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/tags?post=3778"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}