Category: Insights

As the end of the year approaches we here at Chilton Trust would like to highlight a handful of topics we think will help maximize efficiency in both your income and estate tax planning. We hope that we can get you thinking about your current tax situation and how to better plan for your future.

Housecleaning

Outlined below are ideas every taxpayer should be sure to address before the end of the year. Please reach out to your tax accountant or financial adviser if you have questions about any of these:

• Maximize your annual gift exclusion(s). Single taxpayers can gift up to $15,000 and married taxpayers can gift up to $30,000 per recipient without being subject to the gift tax. Ask your tax adviser for more details on what gifts may qualify for this treatment.

• Utilize the increased lifetime gift and estate tax exclusion while it is in effect. The Tax Cut and Jobs Act increased the lifetime estate and gift exclusion to $11,180,000 per taxpayer. Please note that some states have their own estate or gift tax exemption limits, which do not always match the federal amounts. Consult your tax adviser to confirm your estate plans have taken this into consideration.

• Consider a Qualified Charitable Contribution (QCD). For charitably inclined taxpayers who are required to take Required Minimum Distributions (RMD) from retirement accounts, and who do not need the money to live, up to $100,000 per taxpayer ($200,000 Married Filing Joint (MJF)) can be treated as a QCD.

• Time capital gains with capital losses. Your financial adviser is probably already practicing this with current year activity, but check with your tax adviser to see if you have any capital loss carryovers to offset other potential gains you could accelerate into 2018.

• Plan the timing of deductions. With the new increased standard deduction (discussed later), taxpayers who have historically itemized may not exceed the standard deduction. Pay attention to the timing of medical bills, taxes and charitable contributions. If it makes sense accelerate or defer the payment into another year to take advantage of the higher standard deduction.

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Equity Update: The Return of Volatility

Oh what a difference a month makes! February has ushered in the return of volatility to a market that had all but forgotten what it felt like. Since the start of the month, we have seen the Volatility Index (the “VIX”) spike from its January (and all of 2017) average of the low teens all the way to 50, now presently sitting at 29. In addition, over the last month the 10 Year Treasury Yield has moved from 2.55% to 2.83%. The S&P has declined 8.8%. All this action and we are only 7 trading days into the month! So what is going on?

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Robo-advisors, Chatbots and Artificial Intelligence Are Changing the Face of Wealth Management – However, Personal Relationships Remain Key

With the insurgence of technological advancements in the world of wealth management, such as online financial and estate planning software, you may ask: Will artificial intelligence (AI) replace your wealth manager’s role in providing financial advice including investment, retirement and estate planning? Will the digital generation migrate to machines for guidance to secure their wealth for themselves and their loved ones? The answer is: not yet.

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Dear Clients and Friends of the Firm:

As communicated in our last Tax Bulletin, the House and Senate recently passed and released proposals for tax reform titled the ‘Tax Cuts and Jobs Act.’ On December 20, 2017, the House of Representatives and Senate officially passed a unified version of this bill, written by a conference committee of the two legislative bodies. The bill was then signed into law by President Trump on the morning of December 22, fulfilling his promise of enacting tax reform prior to the Christmas holiday. In light of the new tax law, which makes significant changes to current tax policy, Chilton Trust wanted to highlight some key provisions of the new legislation that may impact your taxes. As always, we strongly recommend that you consult with your tax advisor in order to assess how the new legislation may affect your personal or entity tax situation.

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On December 2, 2017, the full Senate passed its amended version of the Tax Cuts and Jobs Act. This Bill now goes to a joint committee (conference committee) of House and Senate members who will try to reconcile the differences in the House and Senate bills and arrive at a compromised version. Republican legislators from high-tax states, however, have some concerns and may be looking for more concessions (e.g., concerns about the repeal of the state and local income tax deduction). The compromised version of the Bill, if any, will then be sent to both chambers of Congress for approval. It is difficult to predict when (or if) the Bill will be finalized, but the goal is to pass the final version of the Bill before the holiday recess. If Congress passes the Bill, it then goes to President Trump for signature.

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Dear Clients and Friends of the Firm: As communicated in our last Tax Bulletin, the House Republicans recently released a proposal for tax reform titled the ‘Tax Cuts and Jobs Act.’ On November 16, 2017, the House of Representatives officially passed its version of the bill, overcoming a significant hurdle in the tax legislative process, which now advances onto the Senate. On that same day, the Senate Republicans approved their own version of the ‘Tax Cuts and Jobs Act,’ from the Senate Finance Committee. This proposed legislation has many key differences from its House counterpart that, if passed, would need to be reconciled with the House bill in a conference committee. Consequently, the final tax bill, if any, that is presented to the President, may be different from the existing House and Senate proposals. Therefore, we continue to recommend that you maintain your current tax planning strategies at least until the full Senate votes on its bill in the beginning of December. We have highlighted below some key differences between the House and Senate proposals.

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Dear Clients and Friends of the Firm: As you may be aware, the House Republicans, via the Ways and Means Committee, recently released its proposal for tax reform titled the ‘Tax Cuts and Jobs Act.’ Yesterday afternoon, the Senate released the initial details of its version of this tax bill as well. If either passes in its current form, this would likely have the effect of increasing taxes on many high net worth individuals, beginning as early as 2018. It is important to note, however, that any tax legislation has several hurdles to pass before becoming law, including approval by all relevant committees, full votes in both the House and Senate, a conference committee to reconcile the House and Senate bills, and then the President’s signature. Thus, the final tax bill that is presented to the President is likely to look different from the current House and Senate proposals. Therefore, we recommend that you continue with your current tax planning strategies until we receive more clarity out of Washington. We have highlighted below some key information from the final House bill that has exited the committee stage, and we will communicate an update once the final Senate legislation exits committee in the next week.

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Estate planning is an area of wealth management that focuses on the accumulation, management, preservation, and eventual transfer of an individual’s assets in a manner that minimizes transfer taxes and transaction costs while simultaneously adhering to the individual’s personal wishes. It can be a complex minefield replete with confusing subjects and difficult conversations. Many individuals avoid planning for their inevitable death because they find the subject matter of their own mortality too morbid. However, if they can overcome the emotional and practical challenges of estate planning, there are various tools that can be employed to facilitate an effective and efficient transfer of wealth to future generations. One such tool, the Qualified Personal Residence Trust (“QPRT”), allows an individual to remove a large portion of his assets, a personal home, from his gross estate prior to his death. This article discusses the fundamentals of a QPRT: what it is, how it works, its benefits and limitations, and how it can be used to lower your estate and gift tax liability.

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Is Long-Term Care Insurance Worth a Second Look?

Americans are living longer compared to historical statistics (although maybe not healthier). The U.S. Department of Health and Human Services states that 70% of people turning 65 today will need some type of long-term care during their remaining years.1 With longevity on our side and uncertainty about the future cost of healthcare, it may be prudent for high net worth individuals to review the option of long-term care insurance, and if appropriate, add a policy to their toolkit for retirement and/or long-term planning. Longterm care insurance (“LTCI”) is insurance which pays for a range of healthcare services and support functions when an individual is no longer able to independently meet his or her personal care needs. These functions are considered “Activities of Daily Living” and consist of eating, bathing, dressing, toileting, transferring and continence. As it is a difficult scenario to address, most people tend to ignore the planning for what will happen to them in their later years of life — be it living in an assisted living facility, paying for home health care personnel in the privacy of one’s house, or having family members come to their aid. All of these are viable options, since most high net worth individuals (a) are typically not eligible for Medicaid; (b) have limits placed by Medicare on its payment of or reimbursement for long-term care facilities and (c) likely have ample liquidity now that one assumes can cover for care later. For those who would prefer to leave those liquid (and other) assets to family members and/or have peace of mind concerning personal healthcare payments for the future, LTCI may be worth a second look as you review your estate plan with your insurance broker, tax expert, or Family Office advisor. LTCI should certainly be addressed if there is a history of long-term illness in the immediate family, a current disability exists, or possibly if one is single and does not have relatives close by.

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The notion of sustainable or impact investing has existed for decades, but only in recent years has it become more mainstream. Sustainable investing was once considered “concessionary capital,” often associated with sacrificing investment returns in order to fulfill philanthropic goals and ideals. The sustainable investing space has developed significantly over the years, and today it offers investors a broad array of options regarding investment objectives and impact goals. When investing in the sustainable space, Chilton Trust seeks positive environmental or societal impact while generating competitive financial rates of return.

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