Triple Tax Whammy Looms for Business Owners

Small business owners face a potential triple-whammy in 2013 if Congress doesn’t renew the Bush-era cuts. The first smack is the estate tax exemption which is scheduled to drop from $5,120,000 in 2012 to $3,500,000 in 2013, and the estate tax rate is scheduled to jump from 35% to 45%. Similarly, the current lifetime gift tax exemption will drop from $5,120,000 to only $1,000,000.

If your estate planner tells you that this is a good year to die, it’s no joke; starting in 2013 your heirs may have to sell the family business you’ve left them in order to pay estate taxes.

The second punch is the Affordable Care Act’s 3.8% tax individuals who make more than $200,000 per year and couples, $250,000 per year. Add that to the proposed capital gains tax increase from 15% to 23.8% for those with incomes over $250,000, and business owners are really kicked where it hurts. (Capital gains are defined as income from sources other than wages, such as business income, bonds, dividends and interest.)

To push more people into “top 2%”, Obama is taking aim at estate planners. Currently, the law treats a grantor and a trust as the same person when it comes to paying income tax. If there are transfers between the two, no income tax is paid. In addition, some grantor trusts are considered to be separate from the person who created the trust, so there is no estate tax on the trust assets when the creator of the trust dies. All this will change if Obama is successful in merging income tax rules and estate tax rules.

Over the years, more and more people will be caught by the new taxes because the adjusted gross income level that triggers them doesn't rise with inflation. What can you do? First, meet with a professional estate planner to learn how the new laws might affect you. If you don’t know any, Allied Brokers can refer one.

Then call Allied Brokers to learn about insurance options that can protect your heirs from both capital gains and inheritance taxes after you die. For example, there is inheritance tax insurance that pays back your family trust the amount it loses to the IRS when you die. Let us help you control the distribution of your assets from beyond the grave.

Visit our website at for information about all the types of insurance we offer. Or call 1-888-505-7988 for a free rate quote.


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