|
|
|
| Education Planning | IRA Planning |
| Estate Planning | Retirement Planning |
| Financial Planning | Year-end Tax Planning |
In
a landmark case in 1934, Judge Learned Hand decreed there is no patriotic duty
to pay the maximum amount of taxes. In fact, one would be considered imprudent
if they did not seek professional advice to avoid paying unnecessary
taxes. This is particularly true
because of our complex tax code with pitfalls and traps for the unwary. For
example, wealthy taxpayers can sometimes save their fortunes (or at least
minimize their estate taxes) by adding relatively simple language to their
wills. Even if you are not wealthy, careful timing of transactions can
result in significant tax savings. I have seen many cases where waiting a
few days before closing a transaction would have saved thousands of dollars.
Therefore, it is important for you to consider the tax ramifications of your
actions (or inactions) and carefully plan for them.
Year-end Tax Planning
There is nothing new or revolutionary with regard to this service. Our
distinction here is in our approach and attention to detail. Click
here for more information on the types of planning we offer. For assistance
with your tax plan contact us before
year-end.
Financial Planning
We also take a different approach toward financial planning.
Unlike other financial advisors, we do not sell investments and we do not accept
commissions. We believe this is imperative to maintaining our independence and
status as most trusted advisor. We want to work with your insurance or stock
broker, but we don't want to be your broker. We believe the public needs unbiased, objective,
and professional advice to help provide balance in
their portfolios and financial plans.
Estate Planning
Thankfully, most clients do not have to deal with estate taxes.
That is, only if they die in the year 2010. After that, nobody knows! That's
when the temporary repeal of the estate tax will be repealed. Does that sound
funny to you? Sure it does! Only our Congress could come up with a situation
like this. But unfortunately it is true. In a weird and perverse manner they
gave us all these temporary tax breaks. They couldn't make them permanent
because they couldn't figure out how to pay for them.So if you die in 2010 you
pay no estate taxes. But if you wait until January 1, 2011 to die your heirs may
be in for a shock because the law will revert back to the old law where you only
get a $675,000 exemption. So how do you plan in such an uncertain environment?
The answer is with a lot of guesswork.
My practical advice to the moderately wealthy (net worth of about a million
dollars) is not to worry too much about estate taxes right now. You are pretty
much covered for the next few years because the exemption of $1,500,000
increases to $2,000,000 in 2006 (and then to $3,500,000 in 2009 before the total
repeal for the year 2010). You can reevaluate your exposure to estate taxes in a
couple of years, when the political environment behind tax policy becomes more
certain.
But if you are very wealthy (net worth of five million dollars or more) you
cannot ignore estate taxes. My guess is the tax will be re-enacted in some
form or another. So you should probably still be thinking about some of the
simple ways to reduce your taxable estate.
I don't like
innovation in this area. I am constantly reading cases about overly
aggressive estate tax strategies that ended up haunting the beneficiaries for
years after the demise of the testator. Instead, we stick to the tried and tested methods that
are allowed under the tax code. The straightforward plans we favor
concentrate on maximizing annual and lifetime exemptions. You would be surprised
by the number of taxpayers who fail to take simple measures that could have
saved large amounts of taxes. With thoughtful planning your heirs may not have
to sell the family farm or family business in order to pay your estate's taxes.
Retirement Planning
The easy part of understanding retirement planning is the time
factor. That is, the more time you allow your money to work for you the better
off you will be. The hard part is understanding the myriad of plans, their
interrelationships, and their tax ramifications. There are pension plans, profit
sharing plans, deferred compensation plans, 401k plans, stock option plans,
stock purchase plans, IRAs, Roth IRAs, rollovers, annuities, variable annuities,
etc., etc., etc. It seems as if the investment industry invents a new retirement
product every year. Unfortunately, many of these products are not purchased.
Instead, they are sold to the public by brokers and salespeople whose
objectivity may be compromised by the large sales commission they earn when you
buy. We believe most brokers and salespeople are reputable and we are proud to
count a number of them as clients. However, there are unscrupulous predators out
there! Keep in mind the fact that a commissioned salesperson makes nothing if he
or she tells you not to buy. We offer an unbiased, second opinion to help you
understand these plans and products and evaluate their suitability to your
needs.
IRA Planning
You might think of IRA planning as a mere offshoot of retirement
planning. However, because of tax complications, the field of IRA Planning has
become a specialty in and of itself.
The simple act of designating a beneficiary usually has a significant effect on
the amount of future distributions you are required to take. This may bring into
question whether you should name your spouse or your children as beneficiaries
(or whether you should name any beneficiary other than your estate). If you name
someone other than your spouse as beneficiary the right to roll over the IRA on
your demise will be lost. And someone will eventually have to pay income taxes
on this IRA. But these income taxes can be avoided if you name a qualified
charity as the beneficiary. So if you have a charitable bequest in your will you
might be better off leaving them a piece of your IRA instead. Thus, what appears to be a simple choice often
involves thorough consideration of conflicting goals, and your decisions now
will have lasting implications for both you and your heirs.
Then there are questions as to when to take distributions. Would it pay to delay
or should you start early? How much do you take? Should you annuitize? Should
you consider a rollover into a Roth IRA?
These and other questions should be addressed by a competent tax accountant, and
not by your stockbroker or insurance salesperson.
Education Planning
Despite the extensive wealth accumulated by massive endowment
funds the cost of a college education for our children is higher than ever. The
public relations spin doctors hired by the universities gleefully report they have curbed cost increases to a meager
7 or 8 % per year. They fail to
mention that is more than twice the rate of inflation. The need to plan ahead is apparent. Even if you don't have a lot of time to plan for these
costs there are still things you can do. There are countless new tax deductions,
credits, and even "education IRAs."
Most of these benefits have income limitations, but there are no income limits
with regard to "Section 529 Plans." I like the New York State
sponsored college savings plan
that is
managed by TIAA/CREF. You don't have to be a NY resident to participate, but if
you pay NY taxes you are allowed a state tax deduction. Contact us for more
information or if you would like to discuss education funding in greater detail.
To contact us Email to Masullo@catskill.net
Peter G. Masullo, CPA
New York, NY
Tax Planning & Financial Planning
www.cpa-taxlawyer.com