Real Estate Developers May Be Able to Avoid Gift Taxes When Passing On Developer Units

In February 2016, two Central Park condos owned by then-candidate Donald Trump had an estimated market value of $790,000 and $800,000. In April 2016, Trump sold these condos to his son, Eric Trump, for pennies on the dollar ($350,000 each, to be exact). For most people, this family-friendly sweetheart deal would typically incur hundreds of thousands of dollars in gift taxes. Not so for Donald Trump. Why? Because he was a real estate developer. A real estate owner who sells a piece of property for less than it’s estimated worth typically has to pay gift tax on the difference between the sale price and the true market value, according to MSN.com. Any personal gifts worth more than $14,000 in a given year are subject to a federal tax that could be as high as 40 percent. However, in Trump’s case, since he the building’s developer selling the condos for the first time, he...

20 January

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The Government Grim Reaper Wants Your Money – States With Terrifying Death Tax Laws

Posted by Bobby Feisee

in Bobby's Blog

Some people think the estate tax is simply a creature of the federal government. Wrong. There are numerous states – 16, along with Maryland and D.C., to be exact – that impose an estate tax. Even more surprising is that some states actually impose an estate tax on estates that are valued at less than one million dollars. At less than one million dollars, these state-enforced estate taxes will be a problem for many middle class families. If you’re frugal and have good savings practices, a middle class family has the ability to save and wind up with an estate close to one million dollars, or more. With proper planning these state estate taxes can be deferred, minimized and potentially eliminated. The taxing authorities look at all of your assets when determining the value of your estate with some surprising valuation methods. For example, many people believe that proceeds from...

16 September

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Creative Estate Planning for Clients No Longer Subject to the Federal Estate Tax

Posted by Bobby Feisee

in Bobby's Blog

When Congress passed the American Taxpayer Relief Act (ATRA), roughly 99.8 percent of U.S. taxpayers became shielded from the federal estate tax (aka the "death tax"). So what does this mean for estate planning? Post-ATRA estate planning appears dramatically different than in years past. For the first time in U.S. history there is a “permanent”, inflation-adjusted and portable exemption amount that essentially excludes the extremely wealthy, from gift, estate and generation-skipping transfer (GST) tax. This is extremely important since, for the past decade, there was a great deal of uncertainty in estate planning. Prior to ATRA, there had been a phased-in repeal of the gift, estate and GST taxes, a “sunset” of that same repeal, then a temporary two-year reinstatement of the taxes, but with a $5 million exemption and a 35% top rate. After the two-year temporary reinstatement, the exemption was set to drop all the way down to $1...

23 August

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DOMA Decision and the Impact on Estate Planning

Posted by Bobby Feisee

in Current Events

In a groundbreaking U.S. Supreme Court decision, United States v. Windsor, the Supreme Court decided that Section 3 of the Defense of Marriage Act (i.e. DOMA) was unconstitutional. To read a summary of the decision, check out this page. Section 3 defined “marriage” to be between a man and a woman for Federal benefits. The result of Windsor is that same-sex married couples will now be treated as spouses for purposes of numerous Federal statutes. With regards to estate planning benefits, the following benefits will now be afforded to same-sex couples. (i.) Deferring income taxes where a spouse inherits a deceased spouse’s IRA or other qualified retirement plan. (ii.) Transferring wealth, either during life or at death, from one spouse to the other spouse without incurring a transfer tax. (iii.) Deferring estate taxes when a spouse passes away. The Windsor decision does not legalize same-sex marriage and it doesn’t hold that same-sex couples...

31 January

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How the American Taxpayer Relief Act (ATRA) Affects Estate Planning

Posted by KarenLewis

in Current Events

By Bobby Feisee, Ashburn Estate Planning Attorney The “fiscal cliff” could have been a fiscal nightmare for people with sizable estates. For example, if we actually went over the cliff, the estate and lifetime gift exemption would have decreased from $5.12 million to $1 million, according to Forbes.com. It would have also meant the possibility of reducing, or outright eliminating, legal wealth transfer strategies. Fortunately, Congress acted quickly after January 1, 2013 and passed the American Taxpayer Relief Act (ATRA). But you may be asking, “how does this affect my estate plan?” Good question. We discussed some of the implications for estate planning in our January 10 post, but we wanted to provide additional information for our readers. Here are four important provisions of ATRA that affect estate planning: 1. The estate and gift tax rate will increase to 40 percent, a jump from 35 percent last year. 2. The exclusion...