Tax Planning for 2015

Estate Planning

tax planning

Advanced tax planning anticipates changes ahead.

Retirement accounts, estate plans, and trusts may be impacted by possible federal tax law changes next year in 2015. While the current configuration of Congress makes these changes unlikely, reviewing possible future changes can help individuals make effective planning decisions now.
After considerable 2013 tax reform in North Carolina, 2014 may prove to be the quiet before the storm. Tax changes in 2015 may include preparing for the restoration of old tax requirements, restrictions on certain trusts, and retirement contribution limits.
Estate, Gift, and Generation-Skipping Tax Rates. Although estate tax exemption portability would still apply, a proposal made by the Obama Administration would revert estate, gift and GST transfer tax exclusions to 2009 rates starting in 2018. The gift tax exemption would drop back to $1 million, the estate and GST exemptions revert to $3.5 million, and the top tax rate would increase to 45%. The proposal also includes a rule that prevents future indexes for inflation.
Grantor Attained Annuity Trust Restrictions. Another possible change is a minimum time requirement for GRATs, which would be 10 years. Short-term rolling GRATs would no longer be possible. GRATs are usually used to help shelter financial transfers to family members from gift tax. The pending change also includes a minimum taxable gift requirement. These are not the only limitations. Short-term GRATs and “99-year” GRATs are in the crosshairs. One amendment includes limiting the GRAT to the maximum term of life expectancy of the annuitant plus 10 years. Check with your North Carolina tax attorney to learn trust options that offer similar or better terms for your needs that aren’t impacted by the American Taxpayer Relief Act.
Retirement Contribution and Distribution Limits. Additional contributions would be limited if the taxpayer has reached retirement benefits (cumulatively) more than the amount necessary to provide the maximum annuity permitted under a defined benefit plan. Typically non-spouse beneficiaries of an IRA must complete distributions within 5 years of the decedent’s death. An amendment proposes exceptions for minors who inherit IRAs, disabled persons, and those who are chronically ill.
Additional tax considerations may be possible for married same-sex couples in North Carolina. As the state does not recognize same-sex marriages, LGBT couples who were married elsewhere are being instructed to file “single” on their state tax returns. There are ways around this tax filing requirement. However, as more federal changes affect state laws around the country, it remains to be seen if North Carolina tax laws will soon change to directly address married same-sex couples.
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