While it may not feel like it, we are currently enjoying historically low income and estate tax policies. However, with the Federal Deficit reaching historic levels, low taxes may not last. Because wealth isn't about what you make, but what you keep, there are a number of strategies to consider now to help protect your wealth from a potentially rising tax environment.
Let's understand some numbers to help put things into perspective:
- The Federal Reserve's balance sheet is around $6.6 Trillion and is projected to rise to $9.3 Trillion according to Oxford, nearly double the prior record.
- The CARES Act may raise the federal debt to $25 Trillion.
- The Congressional Budget Office forecasts the total federal debt load will top total economic output in the U.S. for this year, jumping to 101% of GDP, just slightly below the 106% ratio reached in 1946 after World War II.
All this needs to get paid for, so low taxes may not last:
- We have never seen the U.S. government commit to an outlay of this magnitude aside from two world wars.
- Tax rates are among the lowest U.S. citizens have experienced since the inception of the tax code - this is not likely to last.
Strategies For Higher Taxes To Come
Income Tax Planning Considerations
- Accelerate realizing earned income and capital gains
- Roth Conversions
- 529 Education Plans
- Timing of Charitable Giving
Starkey Financial Partners and LPL Financial do not provide legal advice or tax services. Please consult your legal or tax advisor regarding your specific questions.
Estate Tax Planning Considerations
- Using annual & lifetime gift exemptions
- Evaluate use of life insurance
- Trust Planning & Funding
- Spousal Lifetime Access Trusts
- Generation Skipping Trusts
- And many others