Tax Planning in 2020: Four Tips for Big Savings
By: Barry E. Haimo, Esq.
April 2, 2020
You may feel like you just closed the books on last year’s filings, and here we are — the tax season is upon us again.
Compared to 2019, preparation will likely run a bit smoother since there weren’t quite as many changes to tax legislation this year. Still, there are a handful of significant developments that will require careful attention.
Today, we share four important tips for your tax planning in 2020. We’ll start with a big potential savings if you made one specific change when the 2017 tax changes went into effect.
Maximizing Charitable Donations Through a Donor-Advised Fund
If you were one of many people who opened a donor-advised fund when the new tax laws started in 2018, now is the time to collect on your forethought.
How exactly? If you opened a donor-advised fund in the 2018 tax year and contributed $15,000 then, last year, and now… this year, you could make a single, much larger distribution from the donor-advised fund to your charity of choice. A single $45,000 donation for this year’s filings is nearly double the standard deduction.
No donor-advised fund? No worries. There are a number of other specific (and temporary) legislative developments that have significantly affected the way we plan our clients’ estates this year. Below, we’re going to talk about three of them.
Three More Ways to Improve Your 2020 Estate Tax Results
Exemptions for Gratuitous Transfers of Property
Lifetime exclusions up to $10 million had already doubled when subsequent adjustments this year increased the exemption to $11.58 million. That means proper planning could now yield transfers of property valued up to $23.16 million tax-free (for married couples).
Generation-Skipping Could Have the Grandkids Skipping to the Bank
There are exemption amounts for bequeathing to grandchildren (or more remote generations) equal amounts in gifts outlined above ($11.58 million). What’s more, this exemption may be available in perpetuity* if transferred directly to a trust for those later generations.
*An experienced estate planning attorney will be able to determine whether you are eligible for this tax benefit.
Rules Have Changed on Inherited IRAs
The investment you want to leave to your niece or nephew? Be aware things have changed on how they may receive their inheritance. The SECURE Act says now only certain beneficiaries are allowed to shelter funds beyond 10 years after transferring. This change could have major implications for your estate planning strategy.
Our advice to you? Be sure your tax planning team is covering all your bases.
If you have questions regarding your estate or business tax planning, reach out to Haimo Law now to get the ball rolling. We’ll start by filing an extension for you. And remember, even if we’ve already passed the extension deadline, you won’t earn penalties unless you owe estate taxes this year.
Barry E. Haimo, Esq.
Strategic Planning With Purpose®
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