Your Questions, Answered: Estate Planning Considerations

October 1, 2020

On this week’s episode of Your Questions, Answered Joe Hendrix discusses things to consider with estate planning, and answer the following question:

“Regarding my estate plan, what items do I need to consider?”

Do you have questions you’d like answered? Email them to QA@marinerwealthadvisors.com, and we’ll provide answers.

Transcript:

Joe Hendrix: Every client we work with, whether they’re ultra-high net worth or, just navigating the retirement transition. An estate plan is going to be something that’s going to be really important for us to review and also to monitor every year, year-in-year-out. 

One thing that I think a lot of people don’t realize is that there’s something that’s out there called a step up in tax basis, which essentially means, when you pass away that a lot of the capital gains that you might have within your portfolio or real estate you own, any of these taxable investments. Those capital gains can actually, depending on how they’re titled and where you live, they may actually disappear. And if, for example, let’s say you bought a stock 25 years ago for a hundred dollars and it’s currently worth a thousand dollars and you’re evaluating, do I sell it? Do I give it to my children? Well, if you were to pass away that $900 capital gain you have within that stock, most likely will disappear. It’ll, it’ll be a step up in basis. And when your heirs inherit that stock, they won’t have to pay the capital gains taxes with regard to that capital gain. So it can be a really effective planning tool, especially with those who have a lot of capital gains, but within their portfolios to really evaluate, how do I want this asset to transition to my heirs so that they don’t have to pay these capital gains.  

With the exemptions now being for a married couple, you can inherit, pass on almost $23 million of assets to your heirs or anyone without any estate tax, estate tax challenges with that or state tax liability. In 2002, so not even 20 years ago, that number was $2 million. So we see a lot of times where we’ll have an older or an outdated estate plan that hasn’t been updated in 15 years or so. And it really requires us to go in and reevaluate how those transition items are listed within the estate to make sure that we’re maximizing these step ups and basis to avoid these capital gains. It can really be something that can be a very powerful tool and it can also save a lot of tax money if it’s done the right way. 

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