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Tax planning notes for 2013

November 9, 2012

Following are unformatted meeting notes from a Presentation by Al Klingan JD, LLM, CLU, ChFC in a meeting 11/8/2012 hosted by First Financial at the Philadelphia Union League.


CURRENT LAW FOR 2013 (if no congressional action)
All brackets rise
CG rise to 20%
Dividends 39.6%
Deductions phase out
Exemptions phaseout
Social Security to 6.2%
Additional 3.8% on investment Inc over 200k
Additional amount for high income taxpayers – including home sales

BUSINESS TAXES: LOOKUP: Presidents framework for business tax Feb 2012

Estate tax proposal 3.5 mil
Will have a significant tax cost to govt
Both sides support tax reform
Short 2012 legislative Window after thanksgiving
Record deficit is top priority
2.3 – 2.5 percent annual growth

INCOME TAX STRATEGIES
Accelerate income
Defer expenses + contributions
Pay out refined earnings out of c corps
Sell / buyback appreciated assets this year

MEDICARE STRATEGIES
Life policy cash value buildup

GIFTING STRATEGIES
Added back for estate tax purposes
Discounting opportunities
Leverage with life insurance

WHY GIFT TO IRREVOCABLE TRUST
Use trust, name friend as trustee, retain power to replace, spouse as eligible beneficiary, retain power of substitution, power to borrow. Protects against kids’ problems. Creditor protection.
Good for holding cash value policy.

Move assets into trust in return for note payable at lower amount.

2.4 percent Applicable Federal Rate allowed for long term transactions

GENERATION SKIPPING TRUST
Set up as family bank

LOW INTEREST RATE PLANNING
2 year window of low rates
Installment sale to trust – trust must have 10 percent value in other assets

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