2010 has been, without a doubt, one of the most unusual tax years in recent memory. Not only did Congress unexpectedly allow the lapse in estate tax, but they seem to be unable to come to any decisions about the future tax code. This lack of resolution has people reacting in one of two ways: People have either rushed to take advantage of various once-in-a-lifetime opportunities, or they’ve dragged their feet, reluctant to make any moves until they know what the future may hold. As is usually the case, the best course of action is somewhere in between.
A recent article in Forbes perfectly illustrates how you may be able to have your cake and eat it too in this unusual time. It’s all a matter of planning. “Think about three categories of tax moves: those you should do now, because they make sense regardless; those you can tee up to do in December; and Roth conversions, which you can do now and then undo with hindsight.”
Some of the things you can do right now include:
* Increase contributions to your 401(k).
* Take advantage of the 2010 15% capital gains tax by identifying any corporate bonds that are scheduled to mature next year and selling them this year.
* Set up GRATs while the IRS interest rate is still at an all-time low of 2% (only for GRATS set up before the end of October.)
Some of the things you may want to set up for later include:
* Preparing to take advantage of the lapsed Generation Skipping Transfer tax (and the incredibly low gift tax) by setting up large gifts for grandkids effective at the end of the year. This lapse in GST tax is an incredible opportunity to transfer wealth out of your estate right before the estate tax comes back at potentially high rates.
* Create a plan that you can implement quickly once decisions are made about 2011 tax rates. Traditional advice is to accelerate deductions and defer excess income at the end of the year, but if the tax rates go up you may want to do just the opposite.
Creating good tax and asset protection plans for both the short and the long term is something our office has always done for clients. In fact, having a solid long-term plan is invaluable when strategizing for the short-term. Tax laws change from year to year, and it’s important to be prepared; but your long-term goals are equally as important. When you come into our office we help you take advantage of all the most current asset protection strategies, while ensuring that you’re poised to meet your personal and financial goals for the future as well.
Call our office to set up your own plan today.