Tax Planning
Estate Tax Planning
Eliminating the 40% Death Tax
Our estate plan solutions may involve any of the following approaches:
- Use of revocable living trusts and irrevocable life insurance trusts to transfer assets out of your estate while maintaining control and beneficial use
- Qualified personal residence trusts, especially where your primary residence represents a significant asset
- A/B bypass trusts, dynasty trusts, and generation skipping trusts to avoid and manage the complications presented by California community property law
- Charitable remainder trusts, charitable lead trusts, or gifts
- Community property agreements, prenuptial agreements, and postnuptial agreements
We are estate planning attorneys that have the necessary experience to find the estate planning solutions that will allow you and your family to reduce or to eliminate the voluntary death tax.
Income Tax Planning
Minimizing Your Capital Gains Taxes
When preparing your estate plan, it is important to consider potential income tax consequences especially capital gains taxes. Tax Planning Done the Right Way Means Minimizing your Capital Gains Taxes: Step-up basis is a tax provision that allows heirs to reduce their capital gains taxes. When someone inherits property and investments, the IRS resets the market value of these assets to their value on the date of the original owner’s death. When the heir sells these assets, capital gains taxes are applied based on this reset value. The result is a situation, often considered a tax loophole, that allows investors to pass assets to their heirs virtually tax-free.
The step-up basis, also known as the step-up cost basis, is a way of adjusting your capital gains taxes. When someone inherits capital assets such as stocks, mutual funds, bonds, real estate and other investment property, the IRS “steps up” the cost basis of those properties. This means that for the purpose of capital gains tax, the IRS sets the original cost basis of any given investment asset to its value when the asset is inherited. When the heir sells this asset, they only pay money on profits calculated from the day they inherited it.
Call First Class Counsel to learn how we can save on thousands of dollars on your capital gains taxes.
Real Property Tax Planning
Avoiding Real Property Tax Reassessment
Real Property Tax Planning: With the approval of California’s Proposition 19, the ability to transfer your home or other real property to your children without property tax reassessment has been significantly reduced. The new law, which went into effect on February 16, 2021, has substantially limited the tax break that California families have taken advantage of for many years.
Based on Proposition 19, parents will no longer be able to transfer real property that is not their primary residence to their children without reassessment. If you have a vacation home or rental property, they will be reassessed at the time of transfer to your children. Proposition 19 also limits the use of the transferred property. First, only a transfer of the parent’s principal residence to the child where the property continues as the child’s principal residence qualifies. Second, provided the transfer meets the principal residence requirements, the child’s taxable value is then determined based upon whether the property’s assessed value (fair market value) at the time of transfer is greater than the parent’s taxable value by more than $1 million. If the assessed value of the property at the time of the transfer exceeds the parent’s taxable value by less than $1 million, then the child assumes the parent’s current taxable value. If the assessed value of the property at the time of the transfer exceeds the parent’s taxable value by more than $1 million, then the child’s taxable value is the current assessed value of the property less $1 million.
At our law firm, we can help you legitimately and legally minimize the amount of tax your beneficiaries will pay. You have worked hard for your money and most likely would prefer to pass those assets to loved ones rather than to the government. Call us today so we can evaluate your tax situation and advise you accordingly.
Should a trust be named as a beneficiary of a retirement account? Generally, there can be negative tax consequences associated with doing so.
We are committed to answering your questions regarding tax planning. Let’s discuss tax reduction strategies today, so we can design a special plan just for you and your family.
