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Tag: Estate Planning

Have questions about Estate Planning?

February 21, 2022

Have questions about Estate Planning? Not sure what it means?

Visit our Estate Planning FAQ's Here

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Who Inherits the Property After the Death of the Cosigner?

December 13, 2021

A cosigner has no rights over your property unless you include their name in the deed. If you co-own the property with the cosigner, you need to review your agreement or contract to determine what happens when the cosigner dies.

Read more at LegalReader.com

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Why The Biden Administration Is Motivating Wealthy Families To Address Their Estate Plans

November 9, 2021

At the moment, it appears any immediate changes are on hold. But that doesn’t mean wealthy families can be complacent. In fact, they should be even more motivated.

Read more at Forbes

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5 Ways People Mess Up Their Estate Plan

October 26, 2021

Who are you taking advice from?

Read more at Forbes

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What is "Stepped-Up Basis" and how does this affect you?

January 28, 2021

Pres. Biden has floated the idea of getting rid of something called "stepped-up basis". What is this and how does this affect you? 

When your parents pass and leave you the family house (or any asset), for instance, normally you would inherit that property at what it is worth today, regardless of the cost that your parents acquired it. 

So, for instance, if your parents purchased their home for $40,000.00 thirty years ago (the "basis"), and if, at their death (the last parent to die) the house is worth $200,000, and then, after inheriting it, you were to sell that house today (for, say, $205,000), you would only pay taxes on the gain from what it is worth at the time your last surviving parent died and what it sells for (gain=$5,000.00 in this example - see outline below). This is because the "stepped-up basis" automatically increases the "basis" from the original purchase price ($40,000.00) to what it is valued at upon the last owner to die ($200,000.00). 

If Biden does away with a "stepped-up basis," a policy/law that has been in place for many, many decades, you will inherit the property at the value your parents paid for the property (this is called the "basis" - $40,000.00). If you decide to sell (at $205,000.00) you will pay taxes on the difference between the original purchase price (the "basis" = $40,000.00) and what it sells for today ($205,000.00 = taxable value: $165,000.00). If you choose to try to keep the property, the IRS could still determine a value as of the date of the last to die and tax you on the gain (depending upon how the law and IRS regulation might be effected by such legislation). 

Here is what this looks like: 

Current Policy with a step-ups in basis: 

  • House original purchase price: $40,000 
  • Inherited House at Current Value - $200,000 
  • Sells for $205,000 
  • Taxable income = $5000
  • Taxes Due - 20% of $5000 = $1000 
  • Profit to you = $204,000 

Biden proposed Policy: 

  • Inherited House at original purchase price - $40,000 
  • Sells for $205,000 
  • Taxable income = $165,000 
  • Taxes Due - 20% of $165,000 = $33,000 
  • Profit to you = $172,000 

If your parent were to have sold this property prior to passing they would have paid no taxes because it was their primary residence. This will be, if Biden goes forward with this plan, a massively huge tax on the middle and lower classes, as well as forcing people to incur additional cost and time expenditures attempting to determine the original purchase price of the asset (houses are easier to track down this information than, say, stocks).

Paul A. Ledford, Esq.
Ledford & Associates

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IRS Announces Higher Estate And Gift Tax Limits for 2020

December 9, 2020

An article from October 2020 provides good information for estate planning purposes:

"...the official estate and gift tax limits for 2020: The estate and gift tax exemption is $11.58 million per individual, up from $11.4 million in 2019. That means an individual can leave $11.58 million to heirs and pay no federal estate or gift tax, while a married couple will be able to shield $23.16 million.

The annual gift exclusion amount remains the same at $15,000.

Warning: The $23.16 million number per couple isn’t automatic. An unlimited marital deduction allows you to leave all or part of your assets to your surviving spouse free of federal estate tax. But to use your late spouse’s unused exemption—a move called “portability” — you must elect it on the estate tax return of the first spouse to die, even when no tax is due. The problem is if you don’t know what portability is and how to elect it, you could be hit with a surprise federal estate tax bill.

While Republican death tax foes hope to make the doubled exemption permanent, Democratic presidential hopefuls say they’ll bring it back to its 2009 level of $3.5 million, with a graduated tax rate up to 77%, compared to today’s flat 40% rate.

If you are interested in exploring your estate planning options, please feel free to contact me: 616-257-3300.

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