(Income Tax and Estate Tax)
With constantly changing income and estate tax rules, individuals frequently pay more taxes than necessary. At Guerra TWP, we assist clients in minimizing both income and estate taxes to the least amount payable within the confines of the Internal Revenue Code.
Income Tax Minimization
Income tax strategies can be implemented to minimize both state and federal income taxes. Such planning strategies include formation of business entities, management entities, non-grantor trusts, in-state and out-of-state trust structures, opportunity zone planning, life insurance planning, executive compensation planning, etc. Income tax planning can be particularly effective to minimize taxes at the creation of a new business and at the sale of an existing business. Further income tax benefits can be achieved through planning with Qualified Small Business Stock utilizing C corporations.
State income taxes in states such as New York and California can be so high that they stifle the growth of an individual’s business. With proper planning, it may be possible to avoid these taxes both in the operation and upon sale of a business. In certain situations, state income taxes can be avoided for ongoing investments of an individual’s portfolio of marketable securities. Additionally, trust structures may be utilized to increase the deductibility of state and local taxes paid.
Estate Tax Minimization
When an individual dies, his or her worldwide assets exceeding his or her remaining estate tax exemption are taxed at a rate of 40%. With the estate tax rate currently at 40% and potentially increasing (and the exemption amount potentially decreasing), it is important to develop estate tax minimization strategies as early in the wealth accumulation phase as possible. We see many instances where estate taxes could have been minimized and the surviving family members are surprised to see that they receive a much smaller inheritance than anticipated.
At Guerra TWP, we closely track the ongoing changes in the estate tax law and monitor the available tax minimization strategies. We carefully implement these strategies for our clients to minimize and/or wholly eliminate their estate tax burden.
Estate tax minimization strategies include the formation of grantor and non-grantor trusts, in-state and out-of-state trust structures, business entity planning, leveraging exemptions through valuation discounts, sophisticated life insurance planning (inter-generational, private split-dollar, private placement and premium financed plans), inter-family sales transactions, generation-skipping transfer tax planning, etc.