Anyone who has a trust probably knows that the federal tax rates that apply to trust income and capital gains are much higher and kick-in sooner than on income from earnings or other sources, e.g., ordinary income. As a result, taxes can take a significant bite out of trust assets. And your trust pays Massachusetts state income tax, too, but there is a way to avoid it.
Nothing changed for investors with regard to the new tax law. But other tax law changes have renewed focus on making the most of your investment decisions. This is especially important after such a strong year for US and foreign stocks in 2017. Many investors now have significant unrealized gains and few, if any, losses to offset those gains.
For the last couple of decades, homeowners have benefited from a tax-deduction for the mortgage interest they pay on their residence. Some would say that as a result homeowners have been using their homes as an ATM machine by making withdrawals at low rates whenever they need money. This incentive has helped propel home ownership and, the housing and real markets for many years.
I’ve had a few conversations with parents recently about paying for college. Many seem resigned to scraping together as much as they can and then borrowing the rest, or vice versa to preserve their lifestyle.
Things are changing for future retirees (that includes me!): They are going to live longer and expected investment returns are declining. Combined, these factors are going to put more pressure on retirees.