Use These Strategies to Pass on Wealth to Heirs

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ALIGN CORPORATE ADVISORS
We Provide Expert Services for Mergers and
Acquisitions
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USE THESE STRATEGIES TO PASS ON WEALTH TO HEIRS
Individuals with significant assets should take
advantage of proven tax strategies such as
gifting and direct payments to educational
institutions to transfer wealth to heirs
tax-free, as well as minimize estate taxes.
Additional opportunities are available as well,
thanks to low interest rates and a volatile stock
market. Lets take a look at some of them
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GIFTING
The annual gift tax exclusion provides a simple,
effective way of cutting estate taxes and
shifting income to heirs. For example, in 2021,
you can make annual gifts of up to 15,000
(30,000 for a married couple) to as many
doneness as you desire. The 15,000 is excluded
from the federal gift tax so that you will not
incur gift tax liability. Furthermore, each
15,000 you give away during your lifetime
reduces your estate for federal estate tax
purposes. However, any amounts above this limit
will reduce an individuals federal lifetime
exemption and require filing a gift tax return.
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DIRECT PAYMENTS
Direct payments for medical or educational
purposes indirectly shift income to heirs
however, it only works if the payments are made
directly to the qualifying educational
institution or medical provider. This strategy
allows you to give more than the annual gifting
limit of 15,000 per donee. For example, if
youre a grandparent, you can pay tuition
directly to your grandchilds boarding school,
college, or university. Room and board, books,
supplies, or other no tuition expenses are not
covered. Similarly, they can make direct payments
to a hospital or medical provider, but medical
expenses reimbursed by insurance are not covered,
however.
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LOANS TO FAMILY MEMBERS
This strategy works by loaning cash to family
members at low interest rates, which is then
invested with the goal of reaping significant
profits down the road. With mid and long-term
applicable federal rates (AFR) rates for October
2021, as low as 0.91 and 1.72 percent,
respectively, heirs can lock in these rates for
many years three to nine years (mid-term) and
nine to more than 20 years (long-term)).
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GRANTOR RETAINED ANNUITY TRUST (GRAT)
Another relatively low-risk strategy is the
grantor retained annuity trust (GRAT), where the
donor transfers assets to an irrevocable trust
and receives an annuity payment back from the
trust each year. This strategy enables heirs to
profit from their investments long-term if
returns are higher than the IRS interest rate.
Now that IRS interest rates are so low, this is
easier than ever to do. In October 2021, the
interest rate used to value certain charitable
interests in trusts such as the GRAT is 1.00
percent.
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ROTH IRA CONVERSIONS
Contributions to a traditional IRA are made
pre-tax, which means distributions are considered
taxable income however, the tax is paid upfront
with a Roth IRA, and distributions are completely
exempt from income tax. This feature makes
converting a traditional IRA to Roth IRA and
rolling it over to an heir an attractive option,
especially during a financial crisis. The
conversion is treated as a rollover where the
trustee of the traditional IRA is directed to
transfer an amount from the traditional IRA to
the trustee of the Roth IRA. The account owner
pays income tax on the amount rolled over in the
year the account is converted, which allows the
account to accumulate assets tax-free and future
distributions are tax-free. To learn more about
these and other tax strategies related to wealth
management, please call the office and speak to a
tax professional who can assist you.
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Align Corporate Advisors (ACA)
Address 1300 Ridenour Blvd, Suite 252 Kennesaw,
GA 30152 Email ID info_at_aligncorporatea
dvisors.com Phone NO 1 (678)
831-2285 Website https//aligncorpor
ateadvisors.com/