Hughes Watters Askanase Attorney Dirk Moore Addresses Giving to
Individuals and Charities before Year-End 2012
HOUSTON, Texas (Dec. 20, 2012) – Dirk Moore, senior counsel with Houston-based Hughes Watters Askanase, L.L.P., (HWA) shares insights and perspectives on how individuals and businesses can legally reduce their obligations to the Internal Revenue Service (IRS) for the 2012 tax year by taking advantage of financial giving opportunities before the calendar flips over to 2013 when U.S. tax laws are likely to change.
However, taking advantage of estate and gift tax planning strategies is a very time-consuming process that can be expedited with the help of qualified financial advisors, accountants and lawyers, Moore explained.
Moore, who joined HWA in July 2011, supports HWA’s Business Planning and Strategy, Estate Planning and Probate, and Real Estate and Finance practice areas where he focuses his services on tax and estate planning, real estate and business formations. Moore began practicing law after earning a Doctor of Jurisprudence degree from the University of Texas Law School and being admitted to the State Bar of Texas in 1998.
Gift Tax Exclusions for Individuals and Married Couples
This year, the Internal Revenue Service (IRS) allows taxpayers to give up to $13,000 (and married couples to give up to $26,000) to an unlimited number of individuals without owing federal gift tax. The allowance increases to $14,000 per person in 2013. The $5.12 million lifetime estate tax exemption is set to expire on Dec. 31, 2012, and drop to $1 million absent Congress and President Obama agreeing to a deal to avert the so-called “fiscal cliff.” Additionally, the maximum estate tax rate will increase from 35 percent to 55 percent. A lifetime gift removes the gift and future income from and appreciation on the gift from the individual's taxable estate. These gifts must be irrevocable; therefore, the giver must be confident that he or she will not need the gifted funds in the future.
“Anyone with assets of $1 million or more (which includes assets such as retirement plans and life insurance policies) will be well served to evaluate his or her estate plan before this year ends. Setting up a trust or implementing other estate planning vehicles will allow for transferring wealth to children or grandchildren with as minimal estate and gift tax consequences as allowed by law. High wealth individuals may also consider the benefits of forgiving loans to family members as a means of legally reducing tax liabilities,” Moore explained.
Tax and legal professionals can also assist small businesses, family-owned businesses and individuals with planning and assigning donations to non-profit organizations to reduce their tax outlays this year and in future years.
Moore added that the extent to which charitable contributions can be deducted on the taxpayer’s income tax return varies according to a number of factors including, but not limited to, the type of charity to which the donation is made, and whether the donor is an individual or some form of business entity (such as a corporation, partnership, or limited liability company). He reminds potential donors that not all donations to “tax-exempt” organizations are deductible; therefore, he recommends seeking the guidance and counsel of a tax professional first.
“Making a charitable donation before the next tax year certainly reduces tax burdens for the current year. It has been reported that among the proposals being floated in the negotiations between the President and Congress over the ‘fiscal cliff’ is the possibility of limiting certain tax deductions, including the charitable deductions available to taxpayers. However, limitations do apply that many are not aware of,” Moore offered. “Contributions to certain tax exempt organizations may be deductible on the donor's federal income tax return. While the IRS defines more than 20 different categories of tax exempt organizations, contributions to groups in only a few of these categories are tax deductible. A taxpayer can determine the tax exempt status of an organization either by contacting the local office of the IRS, or by asking the organization for a copy of its Letter of Determination."
Moore noted: “In addition to the altruistic benefits of donating to a charity, you can also gain significant tax advantages. Charitable contributions are generally 100 percent deductible from estate taxes. Among the charitable estate planning options available are charitable remainder trusts which provide for a stream of income to the taxpayer over a set number of years, with the remainder of the trust being paid to a charity upon the expiration of the term of years. Other charitable options include a charitable lead trust and private foundations. Speak with your legal counsel to determine which option is right for you.”
About Hughes Watters Askanase
For more than 34 years, Hughes Watters Askanase, L.L.P. has helped business organizations, financial institutions and individuals succeed with their business endeavors. The firm’s attorneys play a strategic role and support clients through every stage of existence and operation. The firm’s practice focuses on representation of commercial and consumer lenders, including banks and credit unions; business bankruptcy; business planning and strategy; default servicing; real estate and finance; commercial and consumer financial services litigation; and estate planning and probate.
HWA has been listed as the Top Mid-sized Law Firm in Texas for business and transactions in Super Lawyers 2012 Business Edition. HWA is also an independent member of Geneva Group International (GGI) and the only GGI member law firm in Texas.
For more information on Hughes Watters Askanase, L.L.P., please visit www.hwa.com.
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