Asset protection is critically important to ensure a suitable retirement and financial legacy for your spouse and heirs. It also can help to solidify your retirements years. Many Baton Rouge-area families understandably make use of trusts, estates, and other common asset-protection tools to reduce tax liabilities while growing retirement income and building a financial legacy for heirs.
Among the best tools for protecting assets and ensuring a financial legacy for heirs are estates and nongrantor trusts. An estate can hold and grow a significant amount of cash over time. A nongrantor trust enables the asset-provider to ensure a financial legacy for one or more beneficiaries while reducing exposure to personal income taxes.
Fortunately, recently announced IRS regulation proposals would improve asset protections by providing deductions for costs associated with creating and administering an estate or trust. The proposed deductions are:
• Costs arising from the administration of an estate or nongrantor trust that otherwise would not be necessary if the asset were not in an estate or a trust account
• Personal exemption of a nongrantor trust or estate
• Costs arising from income distributions to trust beneficiaries
• Deduction for estates and trusts that grow income via interest, investments, or other legal financial tools
Those proposed deductions would apply to nongrantor trusts and estates, including some small business trusts, and their respective beneficiaries.
The IRS was slated to publish the proposed regulation in the Federal Register on May 11 with public comments accepted the following 45 days. Once the proposed deductions are finalized and published in the Federal Register, they would apply for all subsequent tax years. In the meantime, the IRS is allowing the deductions for the 2018 and 2019 tax years.