Type: Law Bulletins
Date: 11/11/2013

Year-End Business Succession, Charitable and Tax Planning

Though 2013 is drawing to a close, there is still plenty of time to act on business, charitable and tax planning.

Business Succession

Many business owners struggle with the question of how and when to pass business interests to children or grandchildren. Careful planning with trusts and voting interests can allow you to pass your business to family members while keeping control of the business.

  • Consider transferring stock, partnership or LLC interests to trusts for children or grandchildren. A trust can provide asset protection to your descendants while allowing them access to funds for education, health care and other needs. Growth in the value of the business will occur in their estates, not yours.
  • The federal estate and gift tax laws create a favorable environment for making gifts to children and grandchildren without gift tax cost. At the current exemption of $5.25 million per person, business owners can do significant planning without concern about gift tax.

Charitable Planning

Individuals 70 ½ years and older can transfer up to $100,000 of their IRA directly to a qualified public charity by Dec. 31, 2013, without triggering any federal income taxes.

Avoiding the Medicare Tax on Trust Income

The 3.8% Medicare tax applies to net investment income above certain income levels. Trusts reach that level faster than individuals. 

  • Trust income above $11,950 is subject to the tax. Individuals are not subject to the tax until their income reaches $200,000 (single) or $250,000 (joint). 
  • The tax can be avoided if trust income is distributed to beneficiaries whose income will not be subject to the tax. Trustees should consider making income distributions where appropriate.

Attorneys in Taft's Private Client group are available to discuss your business, charitable and tax planning options. We encourage you to contact us with any questions.

In This Article

You May Also Like