How can you keep what you've earned?
You worked hard for your money. Let’s make sure you don’t pay any more in tax than you owe.
St. Charles Estate & Income Tax Lawyer
When planning your estate or preparing to sell an appreciated asset, such as real estate or a small business, tax concerns are often top of mind. We can help you keep more of what you earned. Through our participation in various state and national tax planning associations, we are able to deliver to you the most cutting edge income and estate tax planning techniques available under current law.
How does the Estate Tax work?
In the United States, we are subject to a unified tax on gifts made during life and transfers of property occurring at death. Meaning, the amount a person can give away during life or at death without incurring tax is subject to a single, joined “coupon” amount, referred to as the “unified credit” or the “estate tax exemption.” Although the amount that can be gifted or transferred free from estate tax is at an all-time high, the exemptions are expected to come down very, very soon.
Assets included in a person’s “taxable estate” are usually subject to transfer tax at death once the coupon amount is exhausted. To plan around this, we employ three basic categories of techniques: (1) “compression” techniques, with which the monetary value of the assets in a person’s estate is temporarily reduced at the time of death to squeeze more value through the eyelet of the estate tax exemption amount; (2) “acceleration” techniques, with which assets are transferred at strategic times or in strategic ways prior to death to either freeze the value of the estate or to spread out the applicable tax over time; and (3) “estate burning,” with which assets can grow effectively “tax free” to future beneficiaries.
What about Income Tax?
When you acquire an asset, be it real estate, stocks, a small business, or some other kind of property, the amount you paid for it sets your “tax basis” in the asset (in most cases). You’re only taxed on the capital gain income that you acquire which exceeds your tax basis. For example, if you buy a duplex for $100,000, your tax basis is $100,000. If you later sell the duplex for $300,000, you are only taxed on the $200,000 worth of appreciated gain ($300,000 – $100,000 = $200,000). Without additional planning, that $200,000 will usually be taxable income to you recognizable on your tax return in the year of sale. After adding state, local, and federal income taxes together, you might lose as much as 50% (or more) of that income to tax!
However, what if we could stretch the recognition of that gain out over 10, 20, or even 30 years? Alternatively, what if we could defer it by rolling it into a new property, or into a trust that could invest in anything? Is it possible to make that capital gain disappear entirely? All of these things are possible under the right circumstances and with the right planning.
How does the Estate Tax work?
In the United States, we are subject to a unified tax on gifts made during life and transfers of property occurring at death. Meaning, the amount a person can give away during life or at death without incurring tax is subject to a single, joined “coupon” amount, referred to as the “unified credit” or the “estate tax exemption.” Although the amount that can be gifted or transferred free from estate tax is at an all-time high, the exemptions are expected to come down very, very soon.
Assets included in a person’s “taxable estate” are usually subject to transfer tax at death once the coupon amount is exhausted. To plan around this, we employ two basic categories of techniques: (1) “compression” techniques, with which the monetary value of the assets in a person’s estate is temporarily reduced at the time of death to squeeze more value through the eyelet of the estate tax exemption amount; and (2) “acceleration” techniques, with which assets are transferred at strategic times or in strategic ways prior to death to either freeze the value of the estate or to spread out the applicable tax over time.
What about Income Tax?
When you acquire an asset, be it real estate, stocks, a small business, or some other kind of property, the amount you paid for it sets your “tax basis” in the asset (in most cases). You’re only taxed on the capital gain income that you acquire which exceeds your tax basis. For example, if you buy a duplex for $100,000, your tax basis is $100,000. If you later sell the duplex for $300,000, you are only taxed on the $200,000 worth of appreciated gain ($300,000 – $100,000 = $200,000). Without additional planning, that $200,000 will usually be taxable income to you recognizable on your tax return in the year of sale. After adding state, local, and federal income taxes together, you might lose as much as 50% (or more) of that income to tax!
However, what if we could stretch the recognition of that gain out over 10, 20, or even 30 years? Alternatively, what if we could defer it by rolling it into a new property, or into a trust that could invest in anything? Is it possible to make that capital gain disappear entirely? All of these things are possible under the right circumstances and with the right planning.