Gifting while alive of through your estate can make a difference in taxes.
You are thinking about your estate plan.
How can you optimize your asset transfers?
Should you give them to your children while you are alive?
Should you pass everything through your will or trust?
Is one approach better than the other?
According to a recent nj.com article titled “This estate planning mistake could mean huge tax bill,” this depends on certain factors.
In New Jersey, for example, the estate tax was repealed in 2018.
There is still a federal tax, but your assets must be exceed $11.18 million if you are single or $22.36 million if you are a couple.
The inheritance tax remains in the Garden State.
This tax only affects those who inherit and are not “Class A” beneficiaries.
Who are “Class A” beneficiaries?
These include children, spouse, grandchildren, and parents.
In such case your child would have the same basis (a carryover basis) you had in the asset.
Were she to sell the asset, then there could be a capital gains tax to pay.
What is the capital gains tax?
This is the difference between the sale proceeds and the tax basis of the owner.
Passing the asset to your child at death would allow her to avoid the capital gains tax by affording a stepped up basis to value on your date of death.
Transferring assets is a big decision.
Tax consequences can be significant.
Work with an experienced estate planning attorney to create a plan to benefit you and your loved ones.
So, how do you find an "experienced" estate planning attorney?
First, ask around. Friends, family and other professional advisors are trustworthy sources.
Second, conduct an "organic" search on "Google" for "estate planning" near you (e.g., "Estate Planning Anytown MoKan").
Third, either way, verify! Check out the education, experience, ratings and client reviews of any attorney before you contact him or her.
In fact, I use both of these services to thoroughly vett attorneys before referring members of our "client" family for legal help in other areas of law or for matters in jurisdictions outside Kansas or Missouri.
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), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: nj.com (April 10, 2018) “This estate planning mistake could mean huge tax bill”