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Managing and Preserving Accumulated Wealth

An area of the Internal Revenue Code that could soon see significant reform is in the area of estate tax. The potential shift has knowledgeable tax practitioners recommending possible steps to take, given that some opportunities may no longer exist in the future.

The federal estate tax rate is currently 40%, which is higher than the highest current income tax rate of 37%, and even higher than the 39.6% income tax rate prior to the recent tax cut. The increase in the federal estate tax exemption to $23.16 million for couples, or $11.58 million for single taxpayers, is set to expire in 2026. However, we could see this exemption change much earlier, given the pending election or with increasing federal deficits. If the exemption amounts return to the earlier and lower $11.58 million and $5.26 million figures, significant estate planning techniques will be needed.

Clients who are ready to make transactions such as intra-family loans and grantor retained annuity trusts (GRATs) should consider doing so now. Those who are awaiting the results of the elections would be well advised to spend an hour with a competent tax advisor to design a way forward. Such an approach would identify the amount the client is willing to give away, the appropriate trust for the gift, the type of assets to use, whether an appraiser is needed, and the valuation risk mitigation technique that should be implemented. Be advised that tax preparers and tax advisors are not the same.

Older clients should also reconsider whether to continue to hold onto assets that they own in order to achieve a step-up in basis for capital gains tax on death. That provision might be going away after the November 2020 elections. There are proposals  to eliminate the tax feature that allows individuals to pass tax-free capital gains to their heirs.

Taxes permeate virtually every planning engagement for the private client. For many business owners and other successful individuals, the Internal Revenue Service is the most insistent creditor, and taxes are one of the most significant and ever-present categories of expenses. And it seems that they are likely to get significantly worse, given the recent economic and political climate.

Because they can be such a confusing and frustrating topic, taxes often leave the average tax paying individual or business owner overwhelmed. Trying to deal with then, and plan for them, can become discouraging. This may be especially applicable if adequate competent professional assistance is not sought.

There is no shortage of CPAs and accountants, but these professionals typically think of tax planning as preparing a tax return and informing the client how much additional tax is due. Some might occasionally recommend a variation of an Individual Retirement Account or another common tax maneuver, but they seldom deal with in depth tax planning.

Likewise, an attorney might commonly think of tax planning as preparing the client’s living trust in order to minimize estate administration expense and complexity. And a financial planner or insurance advisor customarily thinks of tax planning as the use of an annuity or 401(k) plan.

Mark Frey’s  approach is different. He is dually licensed as an attorney and a CPA. He has assisted clients for over thirty years by meeting with them to help them plan their best tax situations. This professional service has been provided in addition to preparing their returns and handling their compliance matters. Mark does not consider taxes to be a spectator sport. He encourages his clients to become involved in understanding their taxes and the steps that they can take to reduce them to the extent legally possible.

Having been an IRS agent for seven- and one-half years, a practicing CPA for over thirty years, and now an attorney, Mark has developed an expertise with a wide variety of civil and criminal tax matters. Whether it’s a routine IRS administrative audit, an IRS criminal investigation, or some other kind of IRS matter, competent and knowledgeable  help is available. As a CPA and an attorney, Mark is authorized to appear before the IRS in any jurisdiction. He is also admitted to practice before the United States Tax Court.

Mark has been a member of the American Bar Association since 2015 and the American Institute of Certified Public Accountants since 2011. With office locations in the St. Louis, Missouri, and Louisville, Kentucky Metropolitan areas, his services are available for consultation over a wide multistate area. Contact Mark C. Frey to discuss your situation. An initial telephone consultation will cost you nothing.

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Mark C. Frey Attorney, CPA, M. Tax

mfrey@freytaxlaw.com