One of my favorite media columnists Kelly Phillips Erb, recently wrote a column in Forbes about what she calls the “maddeningly complicated” new Net Investment Income Tax (NIIT). Now, my blog centers on estate planning, not tax law, but sometimes the two subjects do cross over. Ms. Erb’s Taxgirl article described the inception of the NIIT tax, the categories of investments and assets the NIIT affects, and how this all relates to certain high-income taxpayers. She also addressed a few of the ways to potentially reduce or avoid what is taxable according to the NIIT.
One of Ms. Erb’s recommendations is to “give it away,” that is, to donate property that has appreciated (and could be subject to the NIIT) to your favorite charitable cause. Or, give this appreciated property as a gift to family members, such as minors, whose income totals less than the NIIT threshold.
Also, please keep in mind that my blog is simply informational, and it is not intended as professional legal or tax advice. I found Ms. Erb’s article interesting because it provided an excellent springboard to discuss certain aspects of estate planning: namely charitable bequests and gifts that are made through the employment of trusts.
That being said, it is a fact that my work as an estate planning attorney does often include the establishment of certain types of trusts that can present tax advantages. In some cases, the person funding the trust may receive tax benefits within his/her lifetime; in other situations, the advantages may fall to the beneficiaries upon receipt of certain payments or assets through the trust. These are matters that I can work on with you, if you decide that adding a trust to your estate plan is appropriate.
Again, if you have questions about how the NIIT may affect you – and this tax, let me reiterate, does not apply to everyone – I urge you to consult a tax professional such as a CPA, or a tax attorney. However, if you are interested in adding charitable bequests to your estate plan, or investigating the tax-related aspects of creating a trust, please get in touch with me so we can set up a time to talk. To schedule a consultation, please contact us at 818.956.9200.
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