With the gift and estate tax exemptions currently at $5.34 million, you might think that estate valuations are less important. But even if you believe that your estate’s value is under the exemption amount, it’s still important to know the value of your assets.

First, your estate might be worth more than you think. For example, if you own an insurance policy on your life, the death benefit will be included in your estate, which may be enough to trigger estate tax liability.

Second, obtaining a qualified appraisal can limit the IRS’s ability to revalue your assets. If you make gifts that exceed the $14,000 annual gift tax exclusion, you’ll need to file a gift tax return, even if the gift is within your lifetime exemption. Generally, the IRS has three years to audit gift tax returns and challenge reported values for gifted assets. But that period doesn’t begin until the gift has been “adequately disclosed.”

For assets that are difficult to value — such as closely held business interests or real estate — the best way to satisfy the adequate-disclosure requirements and avoid an IRS challenge is to include a qualified professional appraisal with your return.

Please contact us for more information on properly valuing your assets. We can help you comply with IRS requirements and keep taxes to a minimum.

This year, trusts are subject to the 39.6% ordinary-income rate and the 20% capital gains rate to the extent their taxable income exceeds $12,150. And the 3.8% net investment income tax applies to undistributed net investment income to the extent that a trust’s adjusted gross income exceeds $12,150.

Three strategies can help you soften the blow of higher taxes on trust income:

1. Use grantor trusts. An intentionally defective grantor trust (IDGT) is designed so that the trust’s income is taxed to you, the grantor, and the trust itself avoids taxation. But if your personal income exceeds the thresholds that apply to you (based on your filing status) for these taxes, using an IDGT won’t avoid the tax increases.

2. Change your investment strategy. Nongrantor trusts are sometimes desirable or necessary. One strategy for easing the tax burden is for the trustee to shift investments into tax-exempt or tax-deferred investments.

3. Distribute income. When a trust makes distributions to a beneficiary, it passes along ordinary income (and, in some cases, capital gains), which is taxed at the beneficiary’s marginal rate. Thus, one strategy for avoiding higher taxes is to distribute trust income to beneficiaries in lower tax brackets.

Some of these strategies may, however, conflict with a trust’s purpose. We can review your trusts and help you determine the best solution to achieve your goals.

Now that we’re in the new year, it’s time for an estate plan checkup. Why? First, various exclusion, exemption and deduction amounts are adjusted for inflation and can change from year to year, so it’s a good idea to see if they warrant any updates to your estate plan:

	2013	2014
Lifetime gift and estate tax exemption	$5.25 million	$5.34 million
Generation-skipping transfer tax exemption	$5.25 million	$5.34 million
Annual gift tax exclusion	$14,000	$14,000
Marital deduction for gifts to noncitizen spouse	$143,000	$145,000

But inflation adjustments aren’t the only reason for an estate plan checkup. You should also review your plan whenever there are significant changes in your family, such as births, deaths, marriages or divorces. And your estate plan also merits a look if your financial situation has changed significantly.

If you want to find out if your estate plan needs updating — or if you don’t have an estate plan and would like to put one in place — please contact us. We can help you ensure you have a plan that will achieve your goals.

Summer is often a time when people make major life decisions. Common events include buying a home, getting married or changing jobs. If you’re looking for a new job in your same line of work, you may be able to claim a tax deduction for some of your job-hunting expenses.

Here are seven points the IRS wants you to know about deducting these costs:

1. Your expenses must be for a job search in your current occupation. You may not deduct expenses related to a search for a job in a new occupation. If your employer or another party reimburses you for an expense, you may not deduct it.

2. You can deduct the cost of preparing and mailing copies of your résumé to prospective employers.

3. You can deduct employment and job placement agency fees you pay while looking for a job.

4. If you travel to look for a new job, you may be able to deduct your travel expenses. However, you can only deduct them if the trip is primarily to look for a new job.

5. You can’t deduct job search expenses if you’re looking for a job for the first time.

6. You can’t deduct job search expenses if there was a substantial break between the end of your last job and the time you began looking for a new one.

7. You usually will claim job search expenses as a miscellaneous itemized deduction. You can deduct only the amount of your total miscellaneous deductions that exceed two percent of your adjusted gross income.

If you need further clarification about job-search expenses, contact your Whalen tax adviser.