When I meet with business owners, wealthy families, and their advisors, I’m often asked a really interesting question. “What are your other clients doing right now?” 

They are not asking me for names and strategies. They simply want to know what new  things people are doing with their money.  Given that the elections just took place, the “now” part of that question is of even greater importance.  Here are five trends that resulted from the recent tax cuts and that may or may not survive 2019 legislation.  In other words, you have some powerful, and potentially expiring, benefits available to you for at least the rest of 2018. 

Do Your Estate Planning now—in 2018

The estate tax exemption has gone up to $11,200,000 per person.  Wealthy families do not believe these high exemptions will stay in place.  They could possibly be repealed in 2019 and have them retroactively apply to January 1, 2019.  If you have a taxable estate, you have to make gifts now. 

What ‘s the cost of waiting?  If exemptions go back to $5,000,000 per person, and estate tax rates go back up to 50%, the cost of putting off your estate planning could be $6,200,000 in unnecessary taxes. How many grandchildren or great-grandchildren could you put through college with $6,200,000 (plus all of the growth on that money) over the next 20, 30 or 50 years?

Have Your Cake and Eat It Too!

A husband and wife can set up Generation Skipping Tax Intentionally Defective Trusts (GST IDITs) to remove over $22 million (plus all future growth) from your taxable estates, protect the assets from creditors, and still have access to the money during your lifetimes.  It is a MUST do!

What’s the cost of waiting?  The cost of doing nothing could be substantial.  $22 million in your taxable estate could generate $10 to $11 million of estate taxes if you die today.  If you and your spouse live for another 30 years, those funds could grow to $100M-$150M, generating $40M – $60M of unnecessary taxes.  Further, the entire $22M could be lost in a lawsuit if one of your businesses (or dependent children) generates a substantial liability. 

Clean Up Past Messes

When exemptions were much lower, attorneys were forced to created GRATS, loans, and promissory notes to trusts and other creative leverage strategies to get money to heirs without gift taxes. 

Now, with these insanely high exemption amounts, you can go in and forgive promissory notes, buy interests, and pre-fund irrevocable life insurance trusts with no gift tax!  This is so important to do before year end.

What is the cost of waiting?  The financial cost will be the ongoing costs of maintenance.  The emotional cost is the time you have to spend talking to the attorneys who created these structures.  If you clean up the messy planning, you can save time, money, and aggravation.  You get to decide what that’s worth.

Cross State Lines to Save Money

While federal taxes have gone down, the same can not be said for state taxes.  There are state income taxes and state inheritance taxes that are no longer in line with federal rates.  As states continue to struggle, they may impose even greater penalties.  To avoid these future problems, many wealthy families are moving non-grantor trusts into states with no state income tax or with very low tax rates. 

What’s the cost of waiting?  State income tax rates range from 0% in states like Nevada, Florida, and Texas (and a handful of others) to upwards of 12.2% in California (and near double digits in New York, New Jersey, and others).  Do you think your state will increase taxes to pay for its mismanaged budget?  The cost could be 12% of more.

Create Your Own Family Bank

Corporate tax rates are at all-time lows.  You can create corporations to finance family investments and corporations.  The taxes to these organizations are lower than the traditional flow through S-Corporations, Limited Liability Companies, and Family Limited Partnerships. 

You can have these “banks” owned by dynastic trusts that will not be subject to estate taxes for generations.  Wealthy families are creating these tax efficient war chests, then leveraging those dollars to create even greater wealth for their family. 

There’s plenty you can do in 2018 to make the most of 2019 and beyond.

If any of your advisors give you a blank stare, stop giving them a blank check.


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