Tax Time is the Right Time for Estate Planning
It is tax time again, and across the country, millions of Americans are meeting with their tax preparers to reduce their tax liability and minimize their taxes. Older adults have added concerns when filing taxes, especially high net-worth seniors. This year, before you file your return, consider meeting with an elder law attorney. Here are a few things to consider before you file.
Tax time is a good time to take a fresh look at your tax liability
When you sit down with your accountant or tax preparer, it is a great time to review your spending habits and deductions from the previous year. You may find that you have significant tax liability. Maybe you did not track deductions very well, or perhaps you could have given more to charity. Whatever the mistake, now is a great time to start making changes for next year.
Deciding the effect of next year’s gifts
If you are a high net-worth senior, you may wonder whether you can lower your tax liability each year by making gifts to children, grandchildren, and charities. Most traditional estate planning attorneys would advise you to maximize your gifts in order to lower your taxes. However, if you are planning for potential nursing home care or home-based skilled nursing in the near future, there are additional issues to consider.
Although you can gift up to $14,000 per year ($28,000 for married couples) without having to pay a gift tax, if you plan to apply for Medicaid assistance for long-term care within the next five years, you may want to think twice. Regardless of the tax savings, these transfers may trigger serious penalty periods later, if you do actually require nursing home planning. And since nursing home costs are escalating quickly – some Florida nursing homes now cost as much as $10,000 per month – the tax savings could easily be lost within a few months of admission. Either way, you may want to discuss the potential pros and cons with an experienced Florida elder law attorney.
Tax time is a perfect opportunity to assess options for avoiding estate taxes
Although the American Taxpayer Relief Act of 2012 significantly increased the limit for paying an estate tax, many wealthy Floridians living in and around the Villages have enough total assets to trigger this hefty tax on net worth following death. To be sure, you will only be subject to an estate tax if your estate is valued at $5,430,000 in 2015 or $5,450,000 in 2016. Therefore, if you think you may be close to this number, tax time is a great time to meet with an elder law attorney to look at options for starting a trust or reducing your total net worth in order to avoid the estate tax.
If you live in and around the Villages, stop by any one of the two conveniently located elder law offices of the Millhorn Elder Law Planning Group to discuss your estate plan this tax season. After all, tax time is the right time to get your estate plan in order.