Important Estate and Tax Planning Tips for the Fiscal Year

With tax season approaching, it is important to think about the tax implications that come with estate plans. This is because educating yourself on the topic can result in certain benefits before the fiscal year ends. During this time, consider the following estate and tax planning steps:

Bunching Charitable Gifts for Income Tax Deductions

If you do not already have one, it can be beneficial to set up a Donor Advised Fund to contribute to. The amount that is contributed can cover years of future charitable giving. This may allow you to itemize your income tax deductions for the year. This is because a large charitable contribution can produce a significant income tax benefit.

Make a Qualified Charitable Distribution From Your IRA Account

Those who are at least 70 and a half years old must withdraw a minimum amount from their IRA per year. The required minimum distribution (RMD) is usually withdrawn from your accounts and treated as ordinary income that you pay taxes on. While this is true, those who do not need to live on their RMD can make a qualified charitable distribution to satisfy their minimum required distribution for the year. 

Make Sure You Comply With Your RMD

If you fail to withdraw and pay tax on your full RMD amount for the year, it can result in certain penalties. In addition to this, you may wish to consider making a Roth conversion for part of your traditional IRAs. Individuals who are not in a higher income tax bracket can benefit from converting part of their existing IRAs to Roth IRAs on an annual basis. Doing so can provide you with certain future tax benefits, especially if you use funds not held in the converted IRA to pay the income taxes. 

Gift to Your Family Members

Gifts can have a gift tax, estate tax, and income tax effects. However, these can be both positive and negative, which is why it is important to plan gifts carefully so that they can minimize any negative tax consequences and maximize tax benefits. Certain things to consider can include taking advantage of the gift tax annual exclusion up to $15,000, contributing to a 529 Plan for children, making tangible gifts to responsible adults, and contributing to an IRA or Roth IRA for a child.

Consider Trust Distributions for Individuals With Existing Non-Grantor Trusts

Individuals who have an existing non-grantor trust may be able to reduce the overall impact of income taxes on the trust and its beneficiaries. This can be done by having the trust make certain distributions to the beneficiaries so that its income is taxed at the lower individual rates rather than higher trust income tax rates.

Review Your Estate Plan

Estate plans should be reviewed and updated every three to five years. This ensures it is up to date as to who benefits what and how, who will carry out your final wishes, and the legal structure to be used in order to carry out the plan. 

Contact our Firm

Working with an experienced estate planning attorney, such as Jaci Feldman of the Woodland Hills, California, Law Office of Yacoba Ann Feldman, will ensure that you are taken care of when you need it most.Contact The Law Offices of Yacoba Ann Feldman to schedule a consultation today.