Mitt Romney Utilizes Clever Wealth Transfer & Estate Planning - PWM

| Featured Author:?Austin Hagaman?|

Romney?s Tax Returns Reveal Trusts that Shield Money from the IRS

Americans are allowed to pay the lowest tax they are legally obligated to pay and that is exactly what Mitt Romney has done over the past decade. The Republican presidential candidate and his wife, Anne, have used complex wealth transfer and estate planning techniques to minimize taxes and accrue an estimated $100 million for their family outside of their estate.

Bloomberg reports that in 1995 Romney created two trusts. One of the trusts was formed for their children with investments focused on appreciation and the other was for charity that provides a tax deduction and income.

?The Romneys have transferred assets into the family trust and invested them, amassing a substantial and diversified portfolio,? Bloomberg states. ?In 2010 alone, the trust realized more than $7 million in long-term capital gains, about $1.5 million in ordinary dividends and $741,407 in U.S. government interest, according to the trust?s tax return.?

This information indicates that Romney has taken advantage of tax planning techniques ?that are similar to what other high-net ?worth families do,? David Scott Sloan, chairman at the law firm Holland & Knight LLP in Boston, told Bloomberg.

Democrats have scrutinized Romney for exploiting the tax code saying that as a high-net-worth individual he is out of touch with many Americans. I, on the other hand, ask what American would knowingly pay more taxes than what he legally owes?

A Closer Look at Romney?s Trusts

Defective Grantor Trust

According to Bloomberg, the Romneys opened a defective grantor trust for their children. Using this type of trust, Romney (the grantor) has been able to pay the tax bill on the trust?s accumulating income for the benefit of his children. By not paying the taxes out of trust, the assets have more potential to grow outside of the estate.

Charitable Remainder Trust

State financial disclosure documents show that the Romneys also set up a charitable remainder trust (or CRUT). A CRUT is not just a nice way to move money out of an estate by donating to charity; it also pays income to the beneficiary and allows for a tax deduction amounting to the value that is expected to go to charity.

Romney Has More than One Reason to Win this November?s Election

It is expected that Romney?s wallet will take a hit if President Barrack Obama reclaims his title as POTUS.

?The Romneys would pay higher taxes under the estate-tax proposal of President Barack Obama and would pay less under Romney?s plan. Obama has proposed increasing the estate tax from current levels (to a 45% top rate) and curtailing wealth-transfer strategies. The Republican presidential candidate wants to eliminate the estate tax, which currently applies to a top rate of 35% and a $10.24 million exemption on a married couple?s combined assets,? the article explains.

Assuming a combined taxable estate of $200 million after deductions for items such as administrative expenses and charitable contributions, a repeal of the levy may save the Romneys about $70 million in federal estate taxes after they both die, Bloomberg concludes. When compared with today?s rates, Obama?s tax proposal may cost the Romneys an extra $20 million.

Trusts involve risks and are not suitable for all individuals. You should always talk with a qualified financial advisor before making any decisions regarding your wealth. Due to various factors, including changing market conditions and/or applicable laws, the presented material(s) may no longer be reflective of current opinions or positions. The thoughts and opinions expressed in the presented material(s) relate only to the author and are not?necessarily?reflective of PWM?s views. Moreover, you should not assume that any discussion or information contained in the presented material(s) serves as the receipt of, or as a substitute for, personalized investment advice from PWM. 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.?Photo Credit:?Mike Licht, NotionsCapital.com

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Source: http://www.pwm-nj.com/knowledge/tax/romney-tax-return?utm_source=rss&utm_medium=rss&utm_campaign=romney-tax-return

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