New circumstances give rise to new alternatives (and opportunities) for estate planners. This, in turn, is creating some new and difficult choices.
With the new ability to minimize estate taxation, known as “portability,” there is now a choice between the automatic portability plan and the old standby of the trust-based plan, notably the "credit shelter trust" plan.
One important detail driving the choice is the “step up in basis,” as pointed out in a recent Forbes article titled “Portability Plans Vs Credit Shelter Plans Round 1: Step Up in Basis.”
As you may know, the laws surrounding estate and wealth transfer planning underwent a tumultuous change with ATRA.
Time was, we spent our planning sessions looking over our shoulder to see what the status of the estate tax was, but that is a gentler beast these days. Nevertheless, there are new competing concerns for which to plan.
The old planning techniques are not necessarily less useful today, but our motivations may have changed.
To learn more about the old tricks, there are a few related Forbes articles worth perusing: “Planning for Married Couples After ATRA: The Simple Portability Based Plan” and Part 2 thereto.
So what is the takeaway regarding the step up in basis in Overland Park and elsewhere?
A “step up in basis” is somewhat subtle, but its effect is not to be overlooked. After all, the basis of an asset will determine the taxable value to your heirs. Accordingly, to have the basis stepped up at various stages can only help cut the overall tax bill. Consequently, any plan that lets you do this can be useful.
Unfortunately, it is not that simple. Depending upon the assets, simply using the “portability plan” can help realize the greatest tax savings and the original article runs through the scenarios with some math to show how it works.
Whether you have an older pre-ATRA plan in place or if you are just now looking to set up your estate plan, there are simply more moving parts to consider these days. One of those considerations just happens to be cost basis.
Now, more than ever, it is essential to seek competent estate planning legal counsel to help chart the best course for your assets to meet the unique needs of your family.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website.
Forbes (April 8, 2014) “Portability Plans Vs Credit Shelter Plans Round 1: Step Up in Basis”
Forbes (March 18, 2014) “Planning for Married Couples After ATRA -- Part I”
Forbes (March 25, 2014) “Planning for Married Couples After ATRA -- Part 2”