Five Shrewd Family Money Moves
President Trump’s new tax law appears to temporarily alleviate the majority of client’s estate tax worries, but income tax and capital gains tax remain legitimate issues. Here are five tips to maximize assets passed on in a family while reducing or limiting the tax burden:
- Give Stock to the Children
- By “gifting” highly-appreciated stock assets to a younger, less well-off member of the family, the recipient can sell the asset while avoiding some or all of the capital gains taxes on the sale.
- Fund the Children’s Retirement
- 66% of Americans 21-23 have no invested into a retirement plan yet, so another more well-to-do family member can assist by depositing money into a pre-tax retirement account just as an IRA or 401(k).
- Convert Grandparent’s IRA to a Roth IRA
- It may benefit the younger generation for the older IRA owners to convert some or all of their IRAs to Roth IRAs while alive.
- Leave the Right Money to the Right People
- Depending on the income brackets of the beneficiaries, certain assets should go to different people to get the most out of tax-deferred accounts and IRAs as well as highly appreciated assets.
- Keep the Life Insurance Going
- “If the life insurance owner believes the insured will pass away sooner than the product of that equation, it’s probably a good idea to keep paying the premiums and keep the insurance in force.”
See Kevin McKinley, Five Shrewd Family Money Moves, Wealth Management, July 2, 2018.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.