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Millionaires support proposed tax on large wealth: Tax Strategy Scan

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Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.

Millionaires support proposed tax on ultrawealthy
Most millionaires support proposed legislation to tax the wealthy, according this article from CNBC. The study from Spectrem Group and CNBC found that 60% of millionaires — 88% of Democrats, 62% of independents and 36% of Republicans — support Sen. Elizabeth Warren’s proposed bill for a 2% tax on wealth over $50 million and 3% tax on wealth over $1 billion. Warren estimates the legislation would apply to 75,000 of the country’s richest families and raise $275 billion a year. “Over the years, we have seen that this population is willing to pay more,” said George Walper, president of Spectrem. The survey polled 750 people with investible assets of at least $1 million; 261 Republicans, 261 independents and 218 Democrats.

How to file a loved one’s taxes after they’ve passed away
Clients will be responsible for settling a loved one’s tax liability if they are designated as the executor or administrator of the decedent’s estate, an expert on MarketWatch writes. The executor or administrator may be identified in the loved one’s last will or appointed by a probate court if the deceased person left with no will, writes the expert. “The executor’s assignment is to identify the estate’s assets, pay off the debts, and distribute the remainder to the rightful heirs and beneficiaries. The executor is also responsible for filing any necessary tax returns and arranging to pay any taxes.”

The tax benefits of exchange funds
Exchange funds, also called swap funds, can be a great option for investors who need to rebalance their portfolio but want to avoid hefty capital-gains taxes from selling stocks that increased in value, according to this article on Barron’s. That’s because under the law, investors will owe no taxes if they opt to swap their appreciated stocks for ownership shares in exchange funds because of the products’ limited partnership structure. Exchange funds can also be a good strategy in estate planning, as heirs who inherit and sell the funds will owe no taxes on capital gains because the cost basis will be the value of the funds at the original owner’s death.

The 26 cheapest states for retirement
Maine, Pennsylvania and Illinois are among the 26 states with cost of living lower than the national average, but not all of them can be the best place for retirees to reside, according to this article on Yahoo Finance. For example, while the cost of living in Wisconsin is 4% below the national average, retirement income except Social Security benefits are subject to state income taxes. Likewise, New Mexico’s cost of living is 5% below the national average, but the state imposes income tax on retirement benefits.

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Student-loan borrowers with disabilities will be reimbursed after Social Security checks were needlessly garnished
Clients who can no longer work because of disability could be freed of their federal student loan obligations because of the statute known as total and permanent disability discharge, according to this article on MarketWatch. This means that the federal government cannot garnish their Social Security benefits, tax refunds and wages in the event that they default on their student loans. The federal government “should be trying to make it as easy as possible and as streamlined as possible for borrowers who are eligible for disability discharge to receive a disability discharge,” an expert says.

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