Preservation | Family Wealth Protection & Planning

As discussed in an earlier post, trusts and estates may be subject to a 3.8 percent tax on net investment income over certain threshold amounts. Net investment income may include trade or business income from passive activities — those in which the taxpayer does not “materially participate,” according to Section 469 of the code. So, the determination of whether a trust or trustee materially participates may decide whether the income is passive, and consequently, subject to the net investment income tax, or NIIT. 

To help fund the Affordable Care Act, a 3.8 percent net investment income tax took effect in 2013. The tax, known as the NIIT, is imposed against individuals, trusts and estates on non-business income from interest, dividends, annuities, royalties, rents and capital gains above certain thresholds. 

Asset protection can be a valuable tool when building an estate plan. For married couples, state law may offer an additional layer of asset protection by virtue of mere property ownership rules.

Tenancy by the entirety, or TBE, is a special type of property ownership designation that is similar to joint tenancy. There are distinct differences, though: The most significant is that TBE applies only to married couples.