What To Know About Certain Assets That May Receive a Step Up in Basis

Completing your comprehensive estate plan is something that should be done with the support of a qualified estate planning lawyer. An estate planning lawyer helps you to look at all of the assets you own and all of your potential liabilities to determine how these may factor into your probate estate.

Your entire estate includes other benefits and assets as well, such as those that pass outside of probate, like life insurance policies and retirement accounts. Bear in mind that certain assets may have additional financial implications at the time they passed to another party. The most important of these is known as a step up in basis. if you have assets like real estate bonds or stocks and are considering gifting these to others while you’re still alive, it might make more sense to wait.

The reason for this is because when these assets are sold, any increase from the value at the time the asset was first acquired, and the sale price may be subject to capital gains taxes which could seriously impact the overall value of the asset. When you pass away, however, and an heir receives those assets at that time, the assets get a step up in basis.

This means that the market value of the asset at the time you pass away is the cost basis for the heir, which eliminates appreciation prior to that in terms of tax implications. Make sure that you consult with a qualified estate planning lawyer to determine which of your assets may be affected by a step up in basis.


Why You Need to Know About a Step Up in Basis for Estate Planning Purposes?

If you are considering the process of starting your estate planning or you are someone who will be inheriting assets in the future, you need to recognize how step up in basis could influence the value of those assets and your tax obligations. A step up in basis refers to federal tax laws that identify how assets get valued for the purposes of calculating your capital gains taxes.

These can occur when assets are sold, when these assets are left to heirs, or when someone passes away. When someone else inherits the property, the cost basis of a piece of real estate, for example, may change. If someone sells the property for substantial gains, then the resulting capital gains liability is calculated by looking at the step up in basis. The difference between the sale price and the stepped-up basis will determine the capital gains value.

Simply put, a step up in basis means adjusting the cost of an inherited asset up to its fair market value on the date the person passed away, and cost basis begins with the original price paid for the asset.

Working with a qualified estate planning attorney is one of the only ways to understand how this may influence your future assets and to help you plan ahead accordingly. Working with a knowledgeable estate planning lawyer can have many significant benefits for your future.

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Have You Thought About How Your Children Will Divide Household Items?

These items can easily be overlooked in your comprehensive estate plan, especially when there are bigger ticket items such as a piece of property or substantial assets in a retirement account.

But household items can also easily become the subject of an estate planning dispute or arguments among your children and other family members. There are several different strategies you can use to distribute your household items. You may, for example, spell out specific items that are to be received by someone in the family.

If you have a child who loves your wine collection or is also an art aficionado have a conversation with them in advance about what it would mean for them to receive these assets. If you intend to distribute other things equally, you may want to discuss with them how this could alter what else they receive in the estate. A lottery is another opportunity to dispose of household items that you may spell out in your estate plans.

For example, a brief description of every item you own may be put on a slip of paper and siblings can take turns drawing them out until the hat is empty. Another popular method for distributing household items that may not have been specifically called out in your will is to take turns. This allows each sibling to pick a desired item one at a time until everything has been disposed of. If there are remaining items of personal property, those can be donated to somewhere that needs it.

Planning ahead can help decrease the possibility of serious arguments and conflicts that can delay administration of your estate. Meeting with an estate planning lawyer is also strongly recommended so that you can discuss all assets in your estate and whether or not your estate planning strategies still align with your personal goals.



How To Review Benefits And Insurance For Possible Incapacity Planning

Working through the financial and estate planning process means thinking about what happens to you or your assets if you become unable to speak for yourself or care for yourself. Planning for the unexpected and developing contingency plans is crucial, even though you hope you never have to activate these plans.

Unwelcome events can turn your life upside down, and you should start by considering what benefits you really do have in order to decide other ways you need to invest in potential benefits. Look at your employer’s insurance policies and benefits. For example, do you have any other insurance coverage that may apply if you were to become disabled or unable to work? Short term and long term disability policies may come with your employment, or you may have purchased these privately. They will give you a portion of your income if your claim is approved and you’re unable to work.

However, review details about the waiting period before benefits begin and how long they will pay out and at what rate. Disability benefits can be taxable if your employer pays the premium on this disability insurance policy. However, if you are personally paying the premiums, the disability benefits may be tax free. Consider the potential income received through Social Security Disability Income should your assigned disability be expected to last for longer than a year.

If you are concerned about losing your ability to work in Virginia because of a disability, you need to consult with an experienced and qualified estate planning lawyer. A lawyer can help you walk through the important questions for incapacity planning and to put you on track for what you need to evaluate.



What To Know About Naming Beneficiary Designations Following The Secure Act

Tax advantaged accounts, such as IRAs and qualified retirement plans like 403(b)s or 401(k)s require specific estate planning strategies. Creating a trust in and of itself may not be enough to protect the estate planning intentions of the creator of that trust. Revocable living trusts are usually funded with a person’s real estate, non-retirement financial accounts and bank accounts.

In a trust the person states where their assets are going when they pass away and names a backup plan as well. A trust, however, does not control any assets outside of the trust, such as tax advantaged retirement accounts that pass through beneficiary designation forms filed directly with the company manager. In January of 2020, the passing of the SECURE Act changed the rules about inheriting retirement accounts, and now forces earlier distribution and therefore tax consequences on everyone except a few specific people.

Beneficiaries typically fall into a few categories: the spouse of the person who owns the account, non-spouse individuals, such as children, and entities like charities or trusts. Each of these beneficiaries will have different options for what to do when they inherit a tax advantaged account. For people other than spouses with a few rare exceptions, they must receive all account assets within 10 years of the account owner’s death.

Spouses have the most discretion over these situations in that they can consolidate the inherited account into their own tax advantaged account, take a lump sum payment or roll the funds into an inherited IRA. Entities, including certain types of trusts, can include multiple options such as lump sums within five years of the account owner’s death or distribution over the expected lifetime of the account holder. Set up a time to work with an experienced estate planning lawyer to discuss your options.

James Brown’s Estate Settles For Sale Of $90 Million

Owning a lot of assets presents unique estate planning challenges, a lesson that has left many potential heirs of celebrity estates with more questions than answers in recent years.

James Brown, like many other celebrities who have become the subject of recent study, did not complete his estate planning prior to passing away. It was estimated that his estate was worth more than $100 million, but a vague will created many different problems. After a very expensive 15 year legal battle, the surviving heirs sold the value of the estate for $90 million to a company called Primary Wave Music. Multiple people, including five of James Brown’s children, have been fighting in probate court to get control of the estate over the 15 year period. Before any money can be paid out of the estate, all lawsuits must be settled and decided between former and current executors of the estate.

From Whitney Houston to Prince and Michael Jackson and Luther Van Ross, many celebrities with substantial net worth have failed to incorporate even the most basic of estate planning strategies that would have made things easier for their heirs.

Even if you have a smaller estate, you can help prevent delays in the transition of your assets to your heirs and reduce the possibility of estate planning conflict. The best way to do this is to work directly with an estate planning lawyer for the drafting of your own documents.

If you want to avoid problematic situations, schedule a consultation with an experienced and knowledgeable estate planning attorney in VA to discuss your next steps.


Should Tangible Personal Property Go into a Revocable Trust?

Many different kinds of assets can be appropriately placed inside a revocable trust in order to provide control, flexibility and privacy for how those assets are transferred to beneficiaries.

Tangible personal property such as clothing, jewelry, personal papers, computers, books and household goods can be included in trusts, but might be more appropriate as part of a pour over will. In a pour over will, your executor will transfer personal property such as a vehicle into your trust at the time of your death.

This means that transferring into a revocable trust might still require probate, but it greatly simplifies the probate process if there are just a few assets moving into your trust. In some states, bear in mind that a motor vehicle in an individual’s name cannot be transferred without going through probate.

Make sure that you carefully consider some of the unique prospects involved in your personal estate planning strategy. The support of an estate planning attorney is instrumental in helping to recognize some of the core issues in transferring your own estate and in recommending the best kinds of strategies aligned with your personal needs. You may use some combination of a will, a living trust and other estate planning tools to accomplish your goals and to protect your primary interests.

When you meet directly with a Virginia Beach, Virginia estate planning attorney, you can determine which strategies and documents align best with your personal estate planning goals. This makes it much easier to determine your next steps.


How Does an Executor Gather Assets?

Before an executor can serve in their future duties as personal representative for a deceased person’s estate, they must begin by inventorying all assets. Identifying all assets that belong to the decedents and safekeeping them if necessary are two important components of serving as a personal representative.

Safekeeping is especially important if the decedent left behind any assets that could be targeted by thieves. Part of this process, especially if you are not familiar with the belongings of the decedent, could be an actual hunt for assets, such as spending time tracking down insurance policies, safe deposit boxes or financial accounts. Usually an interview with family members and a search through all documents belonging to the deceased is necessary.

Some of these assets could be mentioned in the decedent’s will but the executor cannot stop there and it is dangerous to assume that the only assets belonging to the decedent are those named outright in the will. Once the executor has gathered this material, they then must maintain the assets that require any upkeep. For example, insurance policies maintained by the decedent should not lapse at this point in time.

There is one key way to pay for these ongoing benefits during this temporary period which is to use the estate’s money. No survivors are responsible for paying out of pocket costs for a deceased’s estate.

The more estate planning work you do in advance for your loved ones, the easier it will be for the personal representative to close out your Virginia estate. You can discuss your planning with them or leave detailed instructions and documents for that executor

For more information about naming a personal representative for your estate in Virginia, set aside time to speak with an experienced estate planning lawyer today.



Why Is a Date of Death Value So Important for Your Estate Plan?

When you pass away, the individual appointed as your personal representative is responsible for handling many different tasks in closing out your estate. One of these includes getting date of death values for all property inside a trust or in your estate. This is true and required even if only one person will inherit everything inside your estate.

In a Virginia estate, the chosen personal representative essentially becomes the custodian of this property. During the probate process, it’s managed by the personal representative and kept safe or invested until it becomes time to pass this on to pay off creditors or to distribute to estate beneficiaries.

If you sell the assets shortly after this person passes away, you would be able to use the sale value as the date of death value. Without a sale on the horizon, however, the executor is responsible for getting those assets appraised by an expert. There are four primary reasons why date of death value is so important.

These are for purposes of determining estate taxes, identifying the new tax basis for beneficiaries receiving the asset, qualifying for small estate status or splitting the estate, such as in situations in which a will calls for beneficiaries to equally share assets.

In all of these circumstances, it is important to engage the services of an appraiser. Working with a brokerage account manager is more complicated because many people reinvest their earned dividends. This means the number of shares that they would own could potentially change every single month and this would require a call into the brokerage to verify. For unique items, look for someone to assist you from the Appraisers’ Association of America or the American Society of Appraisers.

Need help with your Virginia Beach, VA estate? Reach out today for a meeting.


Study Shows that Some of America’s Wealthiest People Are Ready to Transfer Their Assets

The tax overhaul from 2017 has prompted many people to rethink their overall estate and tax strategies. The coronavirus pandemic has also made it easier for some of America’s wealthiest families to pass on assets to their grandchildren and children tax free. Volatile markets and plunging interest rates have created a unique opportunity just keeping plenty of financial advisors and estate planners busy.

Some of the ways that wealthy families are taking advantage of this current market is to loan assets or cash to other family members. This means that heirs are eligible to borrow up to millions of dollars and then reinvest that money in profit for many upsides. Many beneficiaries today would be eligible to lock in extremely low rates for years or even decades.

Other estate planning strategies, such as those that relay on loans to trusts are also extremely popular. The advantage of these techniques is that they don’t eat into the gift tax exemption for 2020. Many wealthy families are scheduling consultations with their estate planning lawyers to discuss grantor retained annuity trusts which enables beneficiaries to profit from future investment gains with minimal or no risk of losing money.

Our office is here to help- are you concerned with the most effective strategies to pass on your wealth to the next generation? We can advise you about next steps so you know what to expect. Contact our Virginia Beach office today.