OMG – Can year-end really be approaching this fast? Well ready or not, here it comes. As you’re making your list (and checking it twice) of year-end tax-planning to-dos, we at Geyer Law want to remind you to coordinate those tax moves with your estate planning.
Shoring up tax shortfalls, minimizing “overages”:
Have the amounts withheld from your paycheck been enough to satisfy the tax you’ll owe for 2020? The same question applies if you’re self employed and paying estimated taxes, by the way. Don’t forget to figure in to the up to $1,200 you received under the CARES Act, which needs to be matched up with the 2020 tax credit, FinancialPlanning reminds readers.
Shortfalls – and “overages” – can be “made up” in terms of business and estate planning as well. Anticipating the possibility of higher tax rates next year, one possible focus might be on forming a family limited partnership, bloombergtax.com suggests. The purpose – spreading income among family members, shifting some income out of the high-bracket returns of parents to the lower brackets of children (whose careers have been negatively affected by COVID-19).
Explore opportunity zone investing, which potentially allows deferring – and even reducing – tax on gains if you’re worried about capital gains rates going up next year, FinancialPlanning suggests.
The historically low interest rates we’re enjoying offer a number of use-it-or-lose-it estate planning opportunities as well, we remind Geyer Law clients. Many gift tax as well as estate tax strategies can be based on the assumption that assets in trusts will appreciate faster than the interest rates prescribed by the IRS. 2020 year-end family estate planning can explore different types of grantor trust arrangements to take advantage of this anomaly.
Even simpler, there is one big tax break that Congress passed for 2020 only, increasing the limit on charitable deductions to 100% of adjusted gross income for outright cash gifts. If you’re able to be generous, the next month and a half is the perfect time to benefit causes you care about.
Don’t forget we’re still going through the COVID disaster:
Tax rules allow businesses to claim certain losses attributable to a disaster on a prior-year tax return. A business could claim a COVID-19 related disaster loss occurring in 2020 on a 2019 amended return for a quicker refund, financialplanning.com reminds business owners.
The potential for further pandemic “fallout” serves as a reminder of how important it is for both businesses and individuals to put protection from creditors in place – sooner rather than later.
Meanwhile, coronavirus has highlighted the importance of having a plan to pay for potential long-term care expenses.
As 2020 draws inevitably to a close, it’s time to coordinate your seasonal “outfit”, including both tax and estate planning!
– by Cara M. Chittenden, Associate Attorney with Rebecca W. Geyer & Associates