What the Tax Cuts Mean for You

U.S. News and World Report Smarter Investor

The compromise will be a relief for both investors and their advisors when planning for the future.

Unless you have been hiding under a rock, you know by now that the Obama Administration and the Republicans have reached a compromise on the Bush-era tax cuts, which will not only extend the current income tax rates for the next two years for all Americans, but also keep any capital gains and dividends taxed at the current lower tax rates.

The compromise also reinstitutes the estate tax from the 2010 level (no estate tax—everything is exempt) up to a $5 million exemption per person. This means that a married couple will have a $10 million exemption. Additionally, it sets an estate tax rate of 35 percent for any amount above the $5 million or $10 million limit.

This will fix a major source of estate planning confusion. The compromise will be a relief for both investors and their advisors in terms of planning for the future.

Right now, for 2010, there is no estate tax for anyone who dies this year; however, their heirs will inherit the tax basis of the assets they receive. This will create some difficult tax calculations going forward, but there is still no tax. That’s good for anyone who is entitled.

If no new law were passed, the estate tax exemption would have reverted to $1 million on Jan. 1, 2011, and the top estate tax rate would have moved up to 55 percent. That’s not good—for anyone.

Under the current compromise, unemployment benefits will be extended. There is also some talk of the compromise including Republican support for a nuclear treaty aimed at reducing Russian nuclear weapon stockpiles. And that’s good for everyone, not just for those still looking for work.

For now, it looks like the compromise will add about $315 billion to the federal deficit over the next two years, give or take a billion. There will be a lot more clarity on the details of the deal over the next few weeks, but realize that this last-minute compromise makes it difficult to do proper and exact tax planning as we enter the last few weeks of the year. As details are worked out in Congress and with the President, it will all become clearer.

Talk to your tax advisor about any serious questions you have well in advance of the end of the year.

David B. Armstrong CFA, is a Managing Director and co-founder of Monument Wealth Management in Alexandria VA, a full service Private Wealth Planning and wealth management firm. Monument Wealth Management is backed by LPL Financial, the independent broker-dealer and Registered Investment Advisor. He has been named one of America’s Top 100 Financial Advisors for two straight years byRegistered Rep magazine (2009 & 2010) based on asset under management. David and Monument Wealth Management can be followed on their blog at “Off The Wall“, their Twitter account@MonumentWealth, and on their Facebook page. Member FINRA/SIPC.

*The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for the individual. To determine which investment is appropriate please consult your financial advisor prior to investing. All performance references is historical and is not guarantee of future results. Asset allocation does not ensure a profit or protect against a loss.

Securities and financial planning offered through LPL Financial, Member FINRA/SIPC.

Read this article on U.S. News & World Report >>

Get Monument #Unfiltered: Our Free Private Wealth Newsletter

Our no B.S. wealth advice delivered 2x per month, max. Tuned specifically for busy, high-net-worth business professionals and investors who want straightforward advice without the fluff.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance is no guarantee of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Capital Management, LLC [“Monument”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Monument. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. No amount of prior experience or success should be construed that a certain level of results or satisfaction will be achieved if Monument is engaged, or continues to be engaged, to provide investment advisory services. Monument is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.

A copy of Monument’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.monumentwealthmanagement.com/disclosures. Please Note: Monument does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Monument’s website or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.  It should not be assumed that your Monument account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your Monument accounts; and, (3) a description of each comparative benchmark/index is available upon request.

Please Remember: If you are a Monument client, please contact Monument, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.