Tax Saving Tips for High Income Individuals | 3 Best Wealth Preservation Strategies
  • August 25, 2022
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Nobody enjoys paying more tax than necessary, but that’s exactly what can happen when you don’t plan. Our tax saving tips for high income individuals will get you thinking about what you need to consider to preserve your estate or inheritance.

Several things can be done to preserve your wealth when passing it on to your heirs, including gifting, using an alternate valuation date, and assessing retirement account distributions.

If preserving your wealth is important to you, read on to learn more about these tax-saving tips for high-income individuals.

1. Gifting – Tax Saving Tips for High Income Individuals

Generally, inherited assets are taxed when they are paid to the beneficiaries of the estate. Gifting is our first tax saving tip for high income individuals. It can be used before death, by the estate holder, or after death, by the beneficiary to reduce taxes owing.

In 2020, you can gift up to $15,000 per beneficiary without being subject to gift taxes or receiving the gift having to pay taxes on their end. If you’re a beneficiary who’s already received money from an estate and face taxes, you can make a gift to a registered charity to reduce your taxes with a tax-deductible donation.

Of course, gifting while the estate holder is still alive, offers the most tax-saving benefits for both the estate holder and the beneficiaries.

2. Alternate Valuation Date

An estate executor has the option of choosing a valuation date six months after the date of death if it will reduce both the gross amount of the estate and the estate tax liability. This will often result in a larger inheritance for beneficiaries.

Choosing an alternate valuation date for a decedent’s estate is something that should be considered with the help of a qualified tax advisor. If an estate is not subject to estate tax, then the date of death will be used to evaluate estate assets.

3. Assess Retirement Account Distributions

Our third Tax Saving Tip for High Income Individuals is to assess your retirement account distributions. Inherited assets are taxed when they are paid. There are special rules regarding when the distributions must occur if the beneficiary is not a spouse.

If a retirement account is inherited from a spouse, the surviving spouse can take over the IRA, and minimum distributions would begin at age 72. If the spouse is younger than the deceased, they can elect to use the “single life” method of calculating distributions, which will reduce the amount of the minimum distribution.

For a non-spousal inheritance of a retirement account, funds can be transferred into an inherited IRA in your name. In this case, minimum distributions must occur the year of or the year after the inheritance, regardless of your age.

Planning to minimize tax on an inheritance requires forethought and knowledge of the applicable tax laws. To learn more about how we can help you preserve your wealth, schedule a complimentary call today.

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