Tax Structures and Estate Planning

tax structure estate planning

Choosing The Best Tax Structure For Your Business

Your goals for your business are everything. They give you a way to determine the direction of your business, from your clientele to your products to the nitty-gritty aspects, such as choosing a tax structure. When choosing the best tax structure for your business, you secure its future by operating in the most tax-efficient way and ensuring the legal protections you need. .

At Elite Way CPAs, we will work with you to take a deep dive into the core elements of your business that help us determine the structure that gets you closer to what you want to achieve. We have attorneys we work with to help to assure your trust is set up legally and in compliance with state and federal tax law.

Some elements we look at include:

Preserve And Secure The Assets You Worked Hard For

As a business-owner and as an individual, the future is something that is always on your mind—especially how to preserve and secure the assets you worked hard for.

If your goals are to reduce estate taxes, minimize court fees, and allow your loved ones to access assets quicker than through a will, a trust is the option for you. Through a trust, your wealth is given a level of protection. A third-party, your trustee, is given the right to manage and hold assets—such as real estate, bank accounts, and business ownership—for beneficiaries. With the wide variety of trust types available, there are many ways for one to be arranged that works best for you and your future, and allows you to control how your assets are managed and passed.

At Elite Way CPAs, we understand how critical asset protection is to ensure the highest level of ease and financial security to those you love. That is why we’re here to help, and will work closely with you to develop the most efficient trust and estate plan for you—one that thoroughly secures your assets while saving you money on the legal side.

A Sales Deferred Trust

A Sales Deferred Trust, commonly referred to as a Deferred Sales Trust (DST) in the USA, is a tax strategy employed by individuals selling appreciated assets, typically real estate or businesses, who wish to defer capital gains taxes. This strategy is especially attractive for sellers looking to avoid a sizable tax hit in the year of the sale. By utilizing a DST, the seller can potentially spread out the tax liability over several years, while still gaining flexibility in reinvesting the proceeds or generating a steady income stream.

The mechanics of a DST involve the sale of an asset not directly to a buyer, but instead to a trust. The trust then sells the asset to the ultimate buyer and, since trusts have their own tax identification numbers, this creates an installment sale between the seller and the trust. The trust pays the seller an agreed-upon sum over time, much like an annuity. Because the seller receives payments over time, the capital gains tax is deferred, and the seller is taxed only on the installment amounts received each year. The funds within the trust can be invested to produce income, which can be beneficial to the seller, especially if they are looking for post-sale income.

While the Deferred Sales Trust can offer a substantial tax advantage, it's not a one-size-fits-all solution. Proper structuring and management of the trust are crucial to ensure compliance with IRS regulations. Therefore, sellers considering a DST should consult with tax professionals, financial planners, and attorneys familiar with this strategy to ensure it aligns with their financial goals and to understand the potential risks and benefits fully.

A Charitable Remainder Trust (CRT)

A Charitable Remainder Trust (CRT) is a tax-exempt irrevocable trust designed to reduce taxable income of individuals by dispersing income to the trust beneficiaries for a period of time, usually the lifetime of the trust's beneficiaries, after which the remaining assets are donated to a designated charity. The process begins when an individual transfers assets into the trust; these assets can be a variety of things like cash, stocks, real estate, or even privately held business interests. The trust then sells these assets and invests the proceeds in income-generating securities. The individual who established the trust, known as the grantor, and possibly other beneficiaries, receive periodic payments from the trust for a specified term or for their lifetime.

The Charitable Remainder Trust offers multiple benefits. First, the grantor receives an immediate income tax deduction based on the present value of the eventual gift to the charity. The amount of this deduction is calculated using IRS tables that factor in the age of the beneficiaries, the term of the trust, and the estimated return on the trust assets. Additionally, because the trust is tax-exempt, the sale of assets such as stocks or real estate is not subject to capital gains tax, allowing the full value of the assets to be reinvested. This feature makes CRTs particularly attractive for individuals holding highly appreciated assets.

However, it is crucial to note that once the assets are transferred into the Charitable Remainder Trust, they are irrevocably committed to the charitable beneficiary. This means that the grantor and any other beneficiaries cannot later change their minds and recover the assets. Therefore, it's important to work closely with financial and legal advisors when setting up a CRT to ensure that it aligns with one's long-term financial and philanthropic goals. Despite the irrevocable nature of the trust, its benefits in tax planning, income generation, and charitable giving often make it a valuable tool for estate planning.

Estate Tax Planning

At Elite Way, we believe estate planning is not simply about finances—it’s about your loved ones, the causes you care about, and making sure the legacy you created lives on. However, we know that estate taxes, also known as inheritance taxes, can take a toll on the assets you've accumulated.

Factoring taxes into your estate planning process is crucial in ensuring that those included in your estate plan will not be left with a financial burden after the transfer of assets.

Why Estate Tax Planning Matters

While easing the financial burden on your loved ones, estate tax planning also has additional benefits, as it minimizes tax liability on your assets, ensures your assets are distributed the way you want them to be, and ultimately allows you to safeguard what you worked hard for.

Here at Elite Way, we offer a variety of services that secure your assets and reduce the burden of taxes. Some of our services include:

We know that every person’s financial situation is unique, and it is our goal for our estate tax planning solutions to be tailored to your specific needs. We work with you to create an estate tax plan that not only reduces the tax burden on your inheritors, but also aligns with the goals you have in mind so that you can secure your legacy, your way, with Elite Way.

To get in touch with Elite Way CPAs, just call 725-238-0738 or click the ‘Request a Consultation’ button below.