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Minimizing Taxes and Maximizing Your Legacy in 2019

Posted by Lizette Sundvick | May 01, 2019 | 0 Comments

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For those of us who didn't extend our tax deadline, our 2018 taxes are done. Whew! By now, we have seen the impact the 2017 Tax Cuts and Jobs Act (TCJA) had on our 2018 tax liabilities. With the second quarter of 2019 already underway, it's prime time to review your Estate Plan to address and resolve any tax liabilities you faced this last tax season and plan thoughtfully for the rest of 2019. Let's review what you should be aware of and plan for in 2019.

Taking Advantage of the Current Exemptions

Thanks to the TCJA, exemptions from federal transfer taxes are at historical highs. The amount you can give away during your lifetime or at death without incurring tax is now $11.4 million per individual and $22.8 million per couple, more than double the previous year. This encompasses the federal, gift, and generation-skipping transfer tax exemptions. Take advantage of this now as these highs are slated to expire after 2025 and might possibly drop significantly back down to $5 million (indexed for inflation) thereafter. It's also important to know if the state you live in conforms to federal law; some states' exclusions are considerably lower, and some have inheritance or gift tax that could affect your taxes. It's best to work with your estate planning attorney to ensure you understand the tax implications based on where you live. You should also talk to your attorney about the tax consequences of giving away assets.

Making Annual Gifts

Your annual exclusion from gift tax doesn't count against your exemption mentioned above. This year, you can give up to $15,000 to as many people as you wish without getting hit with the gift tax. Married couples can give up to $30,000 per person. This strategy is a good way to drawn down value to help reduce estate and inheritance taxes over a long period of time. You also do not have to make gifts outright; for instance, gifts to minors can instead be made to trusts, custodial accounts, or education accounts. It's important to note that direct payment for certain medical expenses or tuition may be fully-excluded from gift tax outright. As you can spend an unlimited amount on these kinds of direct payments, it's another great way to benefit others while reducing your estate and tax liabilities.

Using the Standard Deduction

Since the TCJA limited the deduction for state and local income taxes to $10,000 and increased the standard deduction for federal income taxes to $24,000 for a married couple, $18,000 for head of household, and $12,000 for a single individual, fewer of us will be itemizing next tax season. This takes away the tax benefits of charitable contributions, but there's an exception if you're over 70.5. If you are over 70.5 years old and use the standard deduction, you may still be able to reap the tax benefits of charitable contributions if you make them through your IRA. You could reduce your taxable income by making up to $100,000 of charitable contributions this year. If you fall into this age category, consult with your CPA to determine if you are eligible.

With these changes, it's imperative you have an updated Estate Plan, financial plan and tax efficiency plan that take advantage of these opportunities and reduces your tax liabilities. At Sundvick Legacy Center, our goal is to work with your advisors to minimize your tax exposure and maximize what you pass on to your loved ones. If you do not have an Estate Plan, or want your Estate Plan reviewed and updated, please contact us today to schedule an appointment.

Source: "Jump Start Your Tax Planning: Updates and Estate Planning Tips for 2019" by Buchanan Ingersoll & Rooney PC

About the Author

Lizette Sundvick

Lizette B. Sundvick is one of the longest practicing female attorneys in Las Vegas, Nevada. She has been a member of WealthCounsel, LLC since 2002 and has received training from various legal and coaching organizations, such as WealthCounsel, LLC, the Nevada WealthCounsel Forum (Founding President – 2009-2012), National Network of Estate Planning Attorneys,...

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