Estate Planning

Estate Planning is one of the most critical – and often bungled – wealth functions.

Get it right, and you avoid high probate fees, the humiliation of guardianship, and beat estate taxes that could bleed millions from your family. Learn to keep wealth protected and free of tax for generations, using exclusive techniques Dr. Camarda developed to safeguard his family’s fortune. And make no mistake! Estate taxes are going up and will likely take a huge chuck of your wealth without the hard-to-find shrewd advice we excel at. We not only custom plan estates…our legal and tax teams create and deliver custom trust documents and associated structures. We are a sophisticated, integrated one-stop solution for estates and all wealth planning.

From Jeff’s Forbes articles:

How to Beat Massive Estate & Income Tax Hikes: Make no mistake, oh my kittens, taxes are going up, and it a very big way. Not for the COVID-stunned masses, God bless and save them, but surely for you sanctimonious Fat Cats, who surely should pay an ever-fairer share.

The political sky is full of rumblings.

Monetary and now fiscal stimulus rains like manna. Taxes drained from the States are returned them, but only on the condition they spend them, and not cut taxes, with the return of their own money.

Now comes New York, in the wake of a massive exodus of its truly fattest, most productive cats, high-tailing it to tax haven States like my own adopted Florida, pinching the screws on the rich even tighter, hoisting taxes to the highest in the nation, and besting even nose-bleed California in the process. And wait, lest you plucky New Yorkers pack your bags and flee afore the fleecing hits, the new tax is retroactive to January 1st of this here year, dad gum it! Usually Grandfather has some dancing room, but New York’s pulled his plug and chilled the corpse before the band’s even warmed up.

The trend is ugly. The new administration’s long-vowed to hike all Federal taxes on the well-to-do, and to lower the bar on taxable estates to just a few million, meaning many – if not most – readers of this piece will be paying aplenty. And if you still live in New York (I myself fled as a tax-sensitive lad at the tender age of 29 or so), note the NY estate tax – yes Virginia this is on top of the Federal estate tax – starts at the very first dollar for those exposed, and not only on wealth above the threshold “exemption” level, as for the Federal and most States’ estate taxes. As in so many other things, NY innovates and confiscates here, as well.

If ever there was a time to do smart estate planning, now is it. If you move quickly you can still shelter millions – even tens of millions – using the right sort of trusts, but if you want until the law changes and the threshold drops, you’re pretty well sunk, grandpa or no. This is serious – we are talking about converting millions of dollars of your kids’ and grandkids’ inheritance into grist for the government mill, never to be spent by you and yours again.

A favorite technique I teach for this is called the F-BOT, for Family Bank Ongoing Trust. This works like magic for married couples, and let’s them pass up to $35M or so completely free of estate and other transfer taxes, whilst retaining control and spending merriment until death do they part. For most myopic estate planners, that in itself is a hat trick, but the enhancements the F-BOT layers onto the more common SLAT (Spousal Lifetime Access Trust) chassis on which it is build yields lots of other keen features, like asset protection planning, behind-curtain trustee control, divorce failsafes, and intergenerational estate tax shelter. That last one is particularly cool, allowing tax-free wealth accumulation for centuries while letting your offspring run as far to excess as your prudent trust-drafting rules will allow. The blissfully unmarried have a few more hoops to jump through, but the F-BIT – Family Bank Individual Trust – works almost as well.

Calculator and Stacked Coins

These are serious issues for families with a little bit of scratch. The 1.9 trillion COVID stimulus package has to be paid somehow, with likely billions of dollars to be milked from wealthy families. Besides raising the corporate tax rate, Democrat tax proposals will likely increase federal income taxes as well as federal estate taxes. This could have a chilling impact on tax returns for taxpayers across the United States. The Biden tax proposal and other progressive tax proposals suggest the estate exemption and gift tax exemption be dropped to 3.5 million or even as low as 3 million. The 2017 tax cuts may entirely disappear, as tax laws and the tax code changes. Governments across the nation need to raise revenue, and increasing state taxes and municipal taxes can be expected on top of hikes in federal tax and tax bills signed by the White House. The time to perfect your estate plan and estate tax plan is NOW! Unless properly planned, the risk of raising tax, particularly estate tax, on small business may be profound, with even the minimum tax becoming a tax too far. And don’t forget liberal tax proposals to hike the capital gains tax, and even eliminate the capital gains step up in basis at death.

On income tax, there are lots of very effective techniques depending on your situation. Business owners with the right retirement plan advice can set up ROTH 401ks, and move an amazing amount of even depreciated assets into a tax free environment. Not may planners know about this one, but the payoff can be gigantic. Another cool technique is using applied hedge fund partnership tax treatment to convert high-bracket ordinary income to low (while it lasts!) long-term capital gains treatment, with the special sauce of deferring the gain when indicated without giving up access to the case for other investment or frivolous consumption.

If I haven’t written for you much lately, it’s because I’ve been writing a book – and teaching online courses – on how to avoid this massive tax trap before it’s too late. For a detailed but free class on advanced estate tax control, go here. For a different one on how to beat the income tax, watch here. No need to not watch them both! And watch for my upcoming book, The Financial Storm Warning for Investors: to Prepare and Protect Your Wealth from Tax Hikes and Market Crashes, published by Palgrave Macmillan and expected this Fall.

Why You Must Fear The Estate Tax: The estate tax is dead! Long live the estate tax!

Like a Phoenix flaming on the political wind, only to extinguish, then burst anew, this now-you-see-me, now-you-don’t tax is overlooked only at the peril of lasting prosperity. For exposed families, the estate tax can be a devastating blow to generational wealth, from which fortunes never recover. Recent changes in tax treatment have induced a false sense of immunity in many families and their advisors, to the point where a healthy respect for the ravages the estate tax might visit on family wealth has waned, if not disappeared.

This can be a huge mistake for several reasons.

It is true that the expansion of the tax free amount to about $11 million ($22 million for married couples) might seem to give endless breathing room to all but the richest families, but it is important to remember that these lofty exemptions have a short fuse, and will drop to half (about $5.5M per individual or about $11M per married couple) for those who have the misfortune to survive past 2025, when the temporary exemption levels sunset. This sudden shrinkage in the tax-free amount may catch many families unawares, and what seems like an immune estate now – say $8 million – with modest growth (7%) can grow to a taxable sum of almost $16M in a mere 10 years. In 25 years, an estate on the order of $35M is reasonably forecast, with a lurking tax due of some $10M under current law.

Worse, nothing is so certain in tax as change, and there is no reason to believe that new Congresses may not change to far more oppressive policy – perhaps to catch a populist “soak the rich” wave into extended office – in the years ahead, and possibly before 2025 even. Those protective of their purse strings would be wise to recall that the estate tax was initially enacted, back in the original Robber Barron days, not to raise Federal revenue, but to throttle the perpetuation of vast family fortunes (and the political influence they might enable). Could such a theme return a century later? The answer may be blowin’ in the populist wind. Even absent a redistribution bent, mere fiscal pressures – forget not the soaring deficits, and the looming Social Security/Medicare train-wrecks (to say nothing of labor displacement at the “hands” of robots and AI) – could well drive Washington into revenue-scramble mode, and a tax that will impact only a small faction of the electorate, like the fat cats reading this article.

To appreciate what a blow such a turn might deal to your legacy, reflect that not so long ago the individual tax-free amount was a mere $600,000, and that without jumping through some arcane hoops (the old “A/B” trust hustle, now obsolete), married couples did not automatically get two exemptions as in the examples for current law above, but just one! The law actually required that if the spouse was the primary beneficiary (as she darn well better be!), half of the tax break was forgone.

One might suggest that the perennial reports of the estate tax’s demise – or relative toothlessness – are greatly exaggerated, at least for those expecting to draw breath for more than a few short years. Sadly the tonic, such as using relatively simple devices such as Family Bank Ongoing Trusts (F-Bots), can reasonably render many otherwise taxable estates tax free for generations, without unreasonably burdening ma and pa who might wish to use their dough to make merry and live well for a long, long time. Such devices, while simple, are often not employed by even high-dollar advisors to the well-heeled, but that is grist for another article.