Latest news with #TaxCuts&JobsAct
Forbes
2 days ago
- Business
- Forbes
Big Beautiful Bill Just Made The Plaintiff Double Tax Permanent
President Trump signed into law the One Big Beautiful Bill Act, making permanent many temporary tax ... More changes from the Tax Cuts & Jobs Act. The One Big Beautiful Bill Act ('BBB') made permanent several temporary provisions of the Tax Cuts and Jobs Act of 2017 ('TCJA'), while also introducing changes to numerous items related to individual income tax. Several provisions in the BBB affect personal injury plaintiffs and plaintiff firms. Plaintiff Double Tax Is Here To Stay When a plaintiff receives taxable proceeds from a verdict or settlement, they're taxable on 100% of it. That's true even when the plaintiff keeps only 60% after subtracting 40% for their lawyer's contingent fee. Of course, their lawyer still pays tax on that amount. Thus, the fee portion is taxed twice. The double tax hits plaintiffs bringing many types of claims, including those for emotional distress in the absence of physical injuries, bad faith denials of insurance coverage, and defamation. It also hits plaintiffs in many sexual abuse cases and other physical injury cases with taxable proceeds, including punitive damages and post-judgment interest. Legal fees have long been deductible under the miscellaneous itemized deduction rules. However, the TCJA eliminated the miscellaneous itemized deduction for tax years 2018 through 2025. That created the 'plaintiff double tax.' Many hoped that the TCJA's elimination of the deduction would expire on December 31, 2025, when most of the TCJA's tax changes were scheduled to sunset. However, the BBB permanently eliminated this deduction. Legal fee deductions are still available in limited settings, including in cases of 'unlawful discrimination.' BBB Made the TCJA's Lower Tax Rates Permanent The TCJA reduced individual tax rates at nearly all levels of taxable income, with the most significant benefits accruing to those at higher income levels. If the TCJA's reduced tax rates had expired on December 31, 2025, the top three income brackets would have paid federal income tax rates of 33%, 35%, and 39.6%, respectively. The BBB made the TCJA's reduced tax rates permanent. Thus, the top tax rate will remain at 37%. No New Litigation Finance Tax An earlier version of the BBB included a punitive tax on litigation finance companies. Especially when plaintiff firms oppose wealthy corporate defendants, access to litigation finance can be critical. Many opposed the new tax, which was removed from the final version of the BBB. Unsurprisingly, many believe it will be proposed again. The change would have imposed a tax equal to the highest individual rate, plus 3.8%, or 40.8%, on 'qualified litigation proceeds received by a covered party.' A covered party was 'any third party to a civil action which receives funds pursuant to a litigation financing agreement and is not an attorney representing a party to such civil action.' 'Qualified litigation proceeds' were 'realized gains, net income or other profit received by a covered party during the taxable year which is derived from, or pursuant to, any litigation financing arrangement,' and could not be reduced by 'any ordinary or capital losses.' This is all to say – it would have obstructed most litigation finance. Says University of Chicago Law School Lecturer Michael Kelley, 'The proposed litigation finance tax would have had the most negative impact on individuals and small and medium size businesses, which would lose access to funding necessary to litigate meritorious claims against much larger and well-funded tortfeasors and infringers. The bill would also have stifled technological innovation, resulting in tax revenue losses far exceeding any projected tax revenue gains payable by litigation funders under the proposed bill.' No AI Regulation Moratorium Artificial intelligence ('AI') is making it easier for bad actors to engage in unlawful or criminal behavior, such as creating algorithms that make discriminatory employment decisions and powering 'deep fake' technology that creates fake or obscene images of others. In response to this rising threat, states and localities are considering legislation that would regulate the use of AI. An early version of the BBB threatened the ability of states and localities to do so. That version included a provision imposing a 10-year moratorium on state and local enforcement of 'any law or regulation . . . limiting, restricting, or otherwise regulating artificial intelligence models, artificial intelligence systems, or automated decision systems entered into interstate commerce.' The bill would have made AI regulation the sole province of the federal government for the next decade. However, the final version of the BBB dropped the moratorium. SALT Deduction Gets a Bump, and PTET Remains Intact One of the TCJA's most controversial provisions was limiting the individual taxpayer deduction for state and local tax ('SALT') payments to $10,000. Many saw the provision as an effort by Republican lawmakers to punish individuals who live in 'blue' high-tax, large-population states like California, New Jersey, and New York. The BBB increased the SALT deduction cap to $40,000 for 2025 for taxpayers making less than $500,000, which will increase by 1% each year from 2026 through 2029 before reverting to $10,000 in 2030. Taxpayers with a modified adjusted gross income of over $500,000 have a $40,000 cap that is phased downward to a $10,000 floor in 2025 through 2029. Equally relevant for plaintiff attorneys who own firms organized as pass-through entities like partnerships, limited liability companies, S corporations, or sole proprietorships is that the final BBB does not contain a restriction on state-level pass-through entity tax ('PTET') that an earlier version had. PTET is a workaround developed by states after the TCJA. Because the SALT deduction cap generally does not apply to entities, with PTET, a pass-through entity can deduct the amount of the state tax it paid, reducing the taxable income allocated to its owners and avoiding the $10,000 SALT limit. The owners of the pass-through entity receive a state tax credit equal to the amount the entity paid. Opportunity Missed for Sexual Abuse Victims Though legislation was introduced earlier this year to exempt from tax recovery proceeds received by sexual abuse victims, that change didn't make it into the BBB. There are legislative opportunities later in the year, including in a technical corrections bill.
Yahoo
10-07-2025
- Business
- Yahoo
Pharma Companies Remain Calm Amid Fresh Tariff Threat by Trump
And the tariff threat is back. President Trump has once again threatened to impose heavy tariffs on pharmaceutical imports that will possibly be implemented after a year and a half. Nonetheless, the market reaction to the same was pretty calm this time around, unlike the panic that set in last time in April. Trump has reportedly sent letters to various countries worldwide, levying tariffs on goods imported from these countries, effective August. The move, as per Trump, is intended to encourage world leaders to manufacture goods in the United States or else face heavy tariffs. The latest announcement will set in another round of negotiation deals. Along with announcing a 50% tariff on copper imports, The POTUS threatened to levy tariffs as high as 200% on pharmaceutical imports if the pharma/biotech bigwigs do not get their 'act together' in a year and a half. In April 2025, Trump announced so-called 'reciprocal tariffs' on almost all trading partners in a move to reportedly boost domestic manufacturing. The President then also disclosed plans to impose a new series of tariffs on pharmaceutical imports to encourage pharmaceutical companies to move their operations to the United States. He stated that the United States is a very big market, and the new tariffs will propel pharmaceutical companies to rush back to the country. Per reports, the imports comprise both finished drugs and active pharmaceutical ingredients (APIs) used to make drugs. China and India are among the major suppliers of APIs to the United States. We note that most pharma/biotech bigwigs had already announced plans to ramp up manufacturing in the country. Earlier in February 2025, Eli Lilly and Company LLY announced plans to bolster its domestic drug production across therapeutic areas by building four new pharmaceutical manufacturing sites in the United States. This move will bring LLY's manufacturing investments in the United States to more than $50 billion since 2020. Among these, three will focus on manufacturing API, reshoring critical capabilities of small molecule chemical synthesis and further strengthening Lilly's supply chain. In March 2025, Johnson & Johnson JNJ announced an investment of more than $55 billion in the United States (over the next four years) in manufacturing, R&D and technology. Per JNJ, this investment represents a 25% increase in investment compared to the previous four years and builds upon its already increased investments resulting from the passage of the 2017 Tax Cuts & Jobs Act. Following Trump's announcement in April, Swiss pharma giant Novartis NVS announced a planned $23 billion investment over five years in U.S.-based infrastructure. The company intends to manufacture all key drugs for its patients in the country. NVS will build four new manufacturing facilities in three states. Among these, three will be engaged in biologics drug substances, drug products, device assembly and packaging, and one will make chemical drug substances, oral solid dosage forms and packaging. Another Swiss giant Roche RHHBY announced an investment of $50 billion in the United States over the next five years. Roche's investment is expected to create more than 12,000 new jobs, including nearly 6,500 construction jobs, as well as 1,000 jobs at new and expanded facilities. Roche already has a significant existing U.S. presence with more than 25,000 employees, 15 R&D centers and 13 manufacturing sites. Another pharma giant Merck has allocated more than $12 billion to boost domestic manufacturing and research capabilities, with additional planned investments of more than $9 billion over the next four years. The pharma/biotech sector was mostly unaffected by the latest announcement. The disdainful response, in turn, can be attributed to the fact that these companies have been given time to relocate manufacturing. Also, the markets now perceive these announcements as an opportunity for negotiation with the United States. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Novartis AG (NVS) : Free Stock Analysis Report Roche Holding AG (RHHBY) : Free Stock Analysis Report Johnson & Johnson (JNJ) : Free Stock Analysis Report Eli Lilly and Company (LLY) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
23-06-2025
- Business
- Yahoo
4 Ways Trump's ‘Big Beautiful Bill' Will Change How You Plan for Retirement
President Donald Trump's signature legislation, dubbed the 'One Big Beautiful Bill,' includes plans for tax cuts, green energy cuts, Medicaid cuts and more. It also contains new retirement account provisions that could affect how Americans plan for their golden years. Be Aware: Read Next: As the landmark bill makes its way from the House to the Senate, here's a look at what you need to understand about how it can affect how you plan for retirement. Many Americans would receive a break on their taxes owed if the bill is passed. This means they would be able to channel more money into retirement savings accounts. 'Retirement planning fundamentally comes down to having sufficient resources to make work optional,' said Brett Horowitz, principal and wealth manager at Evensky & Katz / Foldes Financial Wealth Management. 'The proposed extensions of the Tax Cuts & Jobs Act provisions, combined with new deductions for tip income, overtime pay and seniors over 65, could significantly improve retirement outcomes for Americans.' Those who benefited from the cuts in the original Tax Cuts & Jobs Act will continue to enjoy these cuts, allowing them to continue saving for retirement as they had been. 'With many TCJA provisions set to expire at the end of 2025, the House Republican proposal to make these extensions permanent may provide the certainty we need for effective long-term planning,' Horowitz said. 'Retirement modeling depends on clear inputs and stable variables,' he continued. 'The less uncertainty in tax policy, the more accurately we can project success rates. When these changes take effect — pending Senate approval — we'll be able to deliver much better news to clients about their retirement timeline.' Horowitz believes if Trump's 'One Big Beautiful Bill' does not ultimately pass, it could negatively affect Americans' abilities to save for retirement. 'There's a profound psychological difference between telling someone they can retire earlier than expected versus having to extend their working years,' he said. 'The former energizes people about their financial future; the latter can feel overwhelming. These tax provisions create the conditions where more Americans can realistically achieve comfortable retirement.' Learn More: Savvy long-term investment strategies should take taxes into account, so changes to tax laws can shift these strategies. 'Smart investing isn't actually about chasing the highest gross returns — it's about maximizing what clients actually keep after taxes and expenses, and this tax bill addresses some issues there,' Horowitz said. 'While we can control costs through low-fee funds, tax efficiency requires a more nuanced approach that varies by everyone's personal circumstances. 'Higher tax rates push us toward tax-free municipal bonds and tax-efficient ETFs in taxable accounts, while we place tax-inefficient investments in retirement accounts,' he continued. 'This 'tax location' strategy can significantly impact net returns, even if it means accounts perform differently.' 'Two provisions in the Tax Cuts & Jobs Act have created the most anxiety for our clients — the SALT deduction cap and estate tax exemptions,' Horowitz said. 'Both are getting significant relief under the current proposal.' The proposed increase in the SALT deduction cap means retirees will face less of a penalty if they choose to spend their golden years in a state with higher income taxes. 'The SALT deduction increase from $10,000 to $40,000 will reshape where people choose to live and retire,' Horowitz said. 'We've already seen migration patterns shift dramatically since 2017, with high-tax states losing residents to states like Florida and Texas. This change reduces the penalty for living in high-income-tax states, though it doesn't eliminate the advantage of no-tax states entirely.' Estate planning strategies would also change for many Americans if the bill were to pass. 'On the estate side, the current $13.99 million exemption was set to drop to $7.14 million in 2026 — a reduction that had wealthy clients scrambling to implement complex gifting strategies and trust structures,' Horowitz said. 'The proposed permanent increase to $15 million per person, or $30 million for couples, provides enormous relief for families in that middle tier.' This is particularly important because of state-level complications, Horowitz continued. 'Take New York, where you could face no federal estate tax, but still owe state estate taxes on estates between $7.16 million and $13.99 million,' he said. 'The interplay between federal and state rules makes domicile planning critical.' The 'One Big Beautiful Bill' should make estate planning less complex for many people. 'For clients who've already implemented sophisticated estate planning strategies, those structures remain valuable,' Horowitz said. 'But for families with estates under the new thresholds, this eliminates the pressure to make rushed gifting decisions or create complex trusts simply to avoid tax cliffs.' Overall, Horowitz believes the bill will make retirement planning easier. 'The permanent nature of these changes — assuming they pass — finally gives families the certainty to make long-term decisions about where to live, how to structure their wealth and when to implement estate planning strategies,' he said. Editor's note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on More From GOBankingRates Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard 10 Genius Things Warren Buffett Says To Do With Your Money 5 Types of Cars Retirees Should Stay Away From Buying This article originally appeared on 4 Ways Trump's 'Big Beautiful Bill' Will Change How You Plan for Retirement Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
30-05-2025
- Business
- Yahoo
AICPA opposes limitations on tax deductions
The American Institute of CPAs (AICPA) has reiterated its stance against the proposed limitations on state and local tax (SALT) deductions for specified service trades or businesses (SSTBs) in the One Big Beautiful Bill Act. The body sent a second letter to the Senate Finance and House Ways & Means Committees highlighting the need for modifications to the 'troubling' tax proposals. In the letter, the AICPA said: 'We are sensitive to the challenges in drafting a budget reconciliation bill that permanently extends tax provisions, enhances tax administrability, and balances the interests of individual and business taxpayers. 'While we support portions of the legislation, we do have significant concerns regarding several provisions in the bill, including one which threatens to severely limit the deductibility of SALT by certain businesses. This outcome is contrary to the intentions of the One Big Beautiful Bill Act, which is to strengthen small businesses and enhance small business relief.' The AICPA called for an allowance for business entities, including SSTBs, to deduct SALT paid or accrued in trade or business activities. This move aligns with the Tax Cuts & Jobs Act's original intent and has been sanctioned by the Internal Revenue Service. The current House version of the bill is criticised for unfairly targeting SSTBs by restricting their SALT deduction capabilities. The AICPA also addressed the risks of contingent fee arrangements in tax preparation, suggesting they could lead to abuse. They recommended removing an amendment that could permanently disallow business losses without offsetting business income. The letter warned against laws that financially harm businesses and discourage professional service-based business formation. The AICPA supported provisions in the bill, such as using section 529 plan funds for credential expenses, tax relief for natural disaster-affected individuals and businesses, and making the qualified business income deduction permanent. They also advocated for the preservation of the cash method of accounting and increasing the Form 1099-K reporting threshold. In addition, the AICPA endorsed permanent extensions of international tax rates and provisions that offer greater certainty and clarity. It also shared a list of endorsed legislation, principles of good tax policy, and a compendium of proposals for simplifying and technically amending the Internal Revenue Code. AICPA Tax Policy & Advocacy vice-president Melanie Lauridsen said: 'While we are grateful to Congress for many provisions in this bill, the unfair targeting of certain types of businesses creates inefficiencies in business decision-making and could result in negative, long-lasting impacts on the economy. 'We hope that Congress will consider our recommendations and make the necessary changes that will create parity between all businesses.' Earlier in May 2025, the AICPA submitted comments to the US Department of the Treasury and the Internal Revenue Service on proposed regulations concerning previously taxed earnings and profits and related basis adjustments. "AICPA opposes limitations on tax deductions" was originally created and published by The Accountant, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Forbes
14-05-2025
- Business
- Forbes
Estate, Charitable Planning For Stock Options, RSUs, And Company Stock
For those who are fortunate enough to accumulate wealth, passing it along to future generations and donating it to charitable causes are important and laudable financial goals. However, you face a unique set of planning considerations if a large portion of your wealth comes from stock compensation: stock options, restricted stock, restricted stock units (RSUs), ESPPs, other types of equity awards, and holdings of company shares. A recent webinar that I moderated featured a trio of experts in this complex planning niche. In this article, I present some of the knowledge and insights they shared. Tax-law changes may be coming soon, as the Tax Cuts & Jobs Act (TCJA) is set to expire at the end of 2025 and Congress is working on a tax plan. However, the TCJA's provisions on the exemption amounts for estate tax and gift tax do not affect the core strategies in this type of planning. The strategies outlined below will persist whether the TCJA is extended or not. Webinar panelist David Haughton, Senior Corporate Counsel at started the webinar by going over the core legal tools involved in estate and charitable planning. Beyond your will, these include trusts and beneficiary designations. A revocable trust, also known as a living trust, acts as a bucket that you fill with your assets. It can help you avoid probate, among many other benefits. As it is revocable, it can be freely amended during your lifetime. By contrast, he went on, an irrevocable trust is a type of trust that can't be modified, amended, or revoked by the grantor once it has been created and funded. An irrevocable trust provides potential tax advantages and asset protection—but you have to be very certain about your decisions. Unlike a will, which does not take effect until you pass, a trust is active on the day of its creation. Assets that you can put into a trust include not only company stock but also equity grants, such as restricted stock units (RSUs) or nonqualified stock options (NQSOs), depending on the terms of your grant agreement and the company's stock plan, which could restrict your ability to transfer equity grants. Alert: Become familiar with limits specified in your stock grants on transferring stock options and unvested stock grants to trusts and for donations. Your company may generally allow transfers while you are living or only to certain types of family trusts. Any transfer does not change the timing of the tax treatment at exercise or vesting. The income will still be recognized by the executive or employee who received the grant. Another estate-planning tool Haughton discussed is the beneficiary designation, in which you leave assets to a beneficiary at death outside the probate process. For stock 'you set that up directly through a financial institution,' he explained. Often this is commonly done with 401(k) plans, IRAs, and brokerage accounts. Depending on the terms of your company's stock plan and procedures, you may be able to designate a beneficiary for your equity awards, such as RSUs or NQSOs. Alert: When you later receive the underlying shares from the RSU vesting, option exercise, or ESPP purchase, the account those shares go into at your brokerage firm will have its own separate forms for beneficiary designation. The beneficiary designations you may have designed for your stock grants do not then automatically apply to the actual shares you receive. The company's stock plan will have provisions dictating what happens to your outstanding equity awards if you die. For example, unvested stock options and RSUs may be forfeited. However, it's not uncommon for the grant agreement to instead allow vesting to continue or even to accelerate the vesting and, for options, extend the exercise period for vested options. Therefore, your heirs, executor, trustees, and beneficiaries need to be familiar with rules for each grant received. For gifting and wealth transfer during your lifetime, tax planning is a major issue, along with your personal cash needs. This was a topic discussed by webinar panelist Mani Mahadevan, the CEO of the firm Valur, a firm that offers resources and strategies on tax planning and estate planning. You can gift a certain amount to other people annually while you are living or at death before triggering gift and estate taxes, Mahadevan explained. In 2025, you may make annual gifts of up to $19,000 ($38,000 if made with a spouse) to any individual without either affecting a portion of your lifetime exemption or paying gift tax. Once you go over that yearly amount, your exemption for gift and estate tax is reduced. When the excess goes over your lifetime gift-tax exemption, you have to pay gift tax. The yearly amounts are indexed for inflation, and amounts over the exemption threshold are taxed at 40%. In 2018, the Tax Cuts & Jobs Act doubled the estate-tax exemption. In 2025, the exemption is $13.99 million for unmarried taxpayers and $27.98 million for married taxpayers. However, the TCJA is currently set to expire in after 2025. If Congress does not extend the tax law, the exemption could return in 2026 to the much lower levels that were in effect before the TCJA. Your state may also have rules on estate tax and inheritance tax to know. With gifts of assets, such as company stock, the tax basis and holding period carry forward. This lifetime gifting is a strategy for all income levels, including gifting shares to those that would have a lower tax rate than you do on capital gains when they sell the stock. Alert: Be familiar with the kiddie-tax rules before gifting shares to your children to then sell. Except for smaller gifts 'you want to gift to trusts rather than individuals,' Mahadevan emphasized. The benefits of giving to an irrevocable trust include advantages in estate tax and even income tax, some ongoing control over how the assets are used, asset protection, and privacy. 'You really want to focus on gifting assets that you expect to appreciate significantly,' Mahadevan continued. This is because at their current value they will use up less of your estate-tax exemption than they will in the future. 'If you gift them sooner, the appreciation happens outside of your estate.' Gift high-tax-basis assets, Mahadevan recommended, and keep low-basis assets. 'When you sell appreciated assets, how much are you going to owe in capital-gains taxes? That's entirely tied to the basis. You typically gift high-basis assets to a trust for your kids.' Why continue to hold the low-basis stock and not put it into an irrevocable trust? For the stock not in that type of trust, after you die your estate or beneficiaries receive a 'step-up' in the tax basis of the shares to the market value of the stock at the time of your death. Therefore, when the company shares are sold, the appreciation in the shares that occurred between your acquisition of the stock and your death would not be taxed to the estate or beneficiary for income-tax purposes. This results in less capital-gains tax for the company stock that appreciated before your death. On the other hand, if you gift those assets to your kids before you pass away, they won't receive a step-up in basis and will owe capital-gains tax on all the appreciation. 'This is a really powerful way for your heirs to inherit and sell appreciated assets and avoid capital-gains tax when they sell the stock,' Mahadevan observed. Webinar panelist John Nersesian, Head of Advisor Education for US Global Wealth Management at PIMCO, went through the many strategies and vehicles for making charitable donations of company stock that you hold. He emphasized first that donating stock held for at least one year is much more tax-efficient than selling the stock and then gifting the cash proceeds, as you get a tax deduction for the fair market value at the time of the stock donation. 'Appreciated investments are a very tax-efficient way to give,' he noted. 'You can avoid the capital gains that would otherwise be realized at the time of sale.' Alert: Donating and gifting company shares are dispositions under special holding-period rules for ISO stock and tax-qualified ESPP stock. The holding period is two years from grant and one year from exercise/purchase. Selling or transferring the stock before the holding period is met triggers a disqualifying disposition. Donation vehicles for company stock that Nersesian discussed include the following. A donor-advised fund (DAF), Nersesian explained, is a private account that you create to manage and distribute charitable donations. When you give to a DAF, such as donating company stock, that amount is eligible for the charitable deduction on your tax return without the need at that point (or perhaps ever) to pick the nonprofits receiving the funds. When you're making a very large donation of appreciated stock to a DAF (or to any charity directly), the tax deduction is limited to 30% of your adjusted gross income (AGI) per year, and you can carry forward what's not used on that year's tax return for five years. Appreciation within a DAF is not taxable. When you itemize deductions on Schedule A of your federal tax return, the DAF 'facilitates the bunching of deductions for maximum tax benefit.' Lastly, there are 'no wash-sale implications—the stock can be repurchased immediately to maintain exposure with higher cost basis.' A CRT is an irrevocable split-interest trust that provides an income stream to designated beneficiaries (donor, spouse, family member) for a defined period (maximum 20 years) or for life. The remaining assets are distributed to designated charities at the end of the term, including DAFs. 'CRTs are suitable for concentrated and highly appreciated assets, such as company stock,' asserted Nersesian. There are many tax benefits. You, the donor, receive a reduced income-tax deduction upon funding. You achieve diversification with deferral of capital-gain recognition and remove assets from your taxable estate. 'A CLT is an irrevocable trust funded with donor assets that provides an annual income stream to a charitable organization for a pre-determined term or life of donor,' Nersesian observed. There is no minimum or maximum. 'The remainder is distributed to the donor's family members or to other noncharitable designated beneficiaries at the end of the term.' Benefits include charitable cash flow and reduced inheritance taxes. Webinar panelist Mani Mahadevan of Valur continued with some strategies and vehicles for estate planning and wealth transfer. They included the following two specialized types of trusts for company stock, including ways in which founders of startups can use them for QSBS stock. 'Particularly if the company is publicly traded and therefore easy to value, consider gifting stock to a GRAT,' said Mahadevan. A GRAT freezes a portion of an estate's value while shifting asset appreciation to beneficiaries. The grantor gives up control of the assets for the term of the trust while receiving a regular annuity payment. At the conclusion of the GRAT term, remaining assets in the trust pass to heirs free of gift tax and estate tax. The trust can be structured so that the grantor does not use any of their lifetime exclusion for gift tax and estate tax. You can transfer any type of financial asset to a GRAT. 'GRATs are one of the most powerful estate-tax strategies, and they're very well suited for public stock positions and become more favorable as interest rates lower,' observed Mahadevan. This is, according to Mahadevan, 'the most common, complex, and potentially impactful estate-planning trust.' The IDGT is an irrevocable trust that removes assets from the grantor's estate but keeps the grantor as the income-tax owner. Therefore, trust assets avoid estate taxes on appreciation. The IDGT is popular, he continued, because of its overall estate-tax efficiency. It allows you to personally pay the trust's income taxes without using up your gift-tax exemption and allows the trust assets to grow tax-free outside your estate. 'If the stock is privately held, it should receive substantial valuation discounts relative to enterprise value.' Specifically, Mani continued, an IDGT is 'for people who expect to be significantly over the estate-tax-exemption amount and want to pass on assets to future generations.' The webinar in which these experts spoke is available on demand at the myStockOptions Webinar Channel. Other resources on gifts and donations, estate planning, and death taxes with equity awards and company stock are available at the website
