Wednesday, August 5, 2020
The COVID-19 pandemic has produced a lot of uncertainty around our economy. Most of us have been worried about when we will be able to return to a normal work life or when our kids will be able to go back to school. For some of us, our lives have completely changed.
There is one thing that not everyone has been worried about: Taxes. It is likely that there will be an increase in taxes in the upcoming year. However, the good news is that unlike the many other issues we are uncertain about, we may actually have some control over this one.
There are certain steps that we can take to mitigate the effects of future tax increases.
As far as estate planning strategies, here are a few things you can do to prepare for an increase in taxes.
- Plan to gift exemption amounts
- Take gains before your death
Income Tax Strategies:
- Accelerate income recognition by:
- Converting your traditional IRA's to Roth IRA's
- Selling appreciated assets now to fund your future spending needs
- Intentionally taking gains in your revocable grantor trusts
- Opting not to defer income into your deferred compensation plan
- Defer deductions
- Structure your investments to reduce taxes by:
- Using lower tax realizing investments such as index funds
- Investing inside life insurance policies
Devising tax planning strategies is a great way to plan ahead for an increase in taxes. Moving forward, this is a must to avoid harsh consequences from a tax increase.
See John Jennings, Higher Taxes Are Coming – Here’s How To Prepare, Forbes, July 28, 2020.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.