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Election

Stepped-up Cost Basis Going Away?

By | Election, Estate Planning | No Comments

Historically in a presidential election year, tax topics are widely discussed and debated between opposing candidates. This year is no different. The candidates have varying views when it comes to the tax planning strategy of stepped-up basis. The elimination of stepped-up basis would result in a significant increase in estate taxes for millions of Americans.

 What assets are affected?

Stock portfolio or real property.

What is Cost Basis?

The amount of an asset when purchased. For example, in the year 2000 Sally purchased a house for $100,000. The basis in the house is $100,000.

What is Stepped-up Cost Basis?

An inherited asset at its current market value as opposed to the basis of the person they inherit the asset from. For example, Sally dies in 2020 and the house is worth $300,000. Sally’s heirs will inherit the asset at the current market value in 2020 ($300,000) as opposed to the basis of when Sally purchased the house in 2000 ($100,000).

What does this mean with Stepped-up Cost Basis?

When Sally’s heirs turn around and sell the house after she passes, their basis is at $300,000, wiping out the capital gain tax that would have been imposed on the gain. (Gain = Sale Price – Cost Basis)

What does this mean if there is not Stepped-up Cost Basis?

When Sally’s heirs turn around and sell the house after she passes, their basis is at $100,000, with results in a gain of $200,000 that will have a capital gains tax imposed. The current top tax rate is 20%, with a proposed top tax rate similar to the ordinary income tax rate (39.6%) on the gain.

One of the additional proposed modifications to the step-up in basis of an appreciable asset, is the gain could be taxed not only if an appreciable asset is sold, but also would automatically be triggered by simply inheriting this type of asset.

The year 2020 will go down in history as one of the most challenging years for American people due to the financial impacts of the Corona Virus. These proposed changes to appreciable assets will have additional financial impacts on millions of portfolios and next generation transfers. If this tax on unrealized gains happens, people will need to rethink their investments and estate plans. Now more than ever, it’s time to rethink investment strategies and have an estate plan created or have an existing estate plan reviewed immediately.

Election Results Still Unknown - Estate Planning Scenarios for Each Candidate

By | Election, Estate Planning, Financial Planning | No Comments

The election happened November 3rd!  There are millions of ballots cast, but the outcome is yet to be determined. 

With any election, but more so with this one, many Americans are wondering how they will be affected. There are significant differences with each party’s platform including significant changes in tax laws.  Tax changes will affect every family’s estate and financial plan.

The Democratic Party’s platform includes expansion of several renewable-energy-related tax credits. The Republican Party’s platform includes U.S. energy independence, safeguarding the cybersecurity of the national power grid and other critical infrastructure, and deregulation to ease the process of planning and construction. These are not the Parties’ only planks in their respective platforms, just some of many proposals if their side should win.

So how does this affect your estate and financial plan? On the surface if Biden wins, investors could potentially see a spike in investments around the green new deal. If Trump wins, a spike in stocks dealing with construction and infrastructure are likely. Investors are projecting a potentially volatile market.  The outcome will provide markets some clarity, but since mail-in ballots take more time to collect and count, the volatility may persist beyond election day.

Join Charles Randall from Clark Street Financial and Lisa Wynn from Morris Hall as they discuss the impact on your financial and legal plan after the results of the election are announced.

Estate Planning after the Presidential Election

By | Election, Estate Planning | No Comments

I often meet with families because of an important life changing event (marriage, death, birth, special needs, etc.). These common events provoke families to start thinking about their demise and how to best leave their legacy to their loved ones. Another event that typically triggers families to discuss their estate plan is during an election year. As we know this election year has been coined has an election year that will go down in history. Across party lines there are differing views on topics of future income tax rates, capital gains tax and estate tax. Regardless of who is in office in January 2021, there is no better time than now to review your estate plan.

One such tax that has received a spotlight during the presidential race is the federal estate tax, or otherwise known as the ‘death tax.’ The current federal estate tax exclusion amount is $11,580,000 per taxpayer, or $23,160,000 for a married couple (indexed for inflation). The current exclusion is set to expire at the end of 2025.

For some reading this, you might think that the federal estate tax will never be imposed on your estate after you pass away. Depending on who is elected President, this exclusion amount may be drastically reduced, thereby imposing a death tax on a greater number of estates.

Here is a glimpse of how the exclusion amount has changed over time –

                Year                                       Exclusion Amount

1987-1997                            $600,000

2006-2008                            $2,000,000

2009                                       $3,500,000

2010                                       Unlimited

2016                                       $5,450,000

2020                                       $11,580,000

Regardless of who will be the President for the next four years, it is important that you have your estate plan reviewed. There are important tax planning strategies through a properly drafted estate plan to help mitigate the devasting impact a death tax can have on your family.

Hang On Until January 20th, When All Will Be Well

By | Election, Estate Planning | No Comments

This has been quite an election cycle.  Most people have expressed great concern about the outcome of the presidential election, and emotions and fears are high.  I have jokingly told clients and attendees at public and private seminars that they need not worry – just hang on until the end of January.  All will then be well.  I have listened to all of the candidates, and each has promised that he/she will solve all our problems.  WOW.

While entertaining at times, the political process has been frustrating, irritating, and threatening to many, if not most.  Some predict the end of our democratic institutions; some have lost faith in almost all elected officials.  Almost all worry to some extent how we will restore more peaceful times, and whether we will be able to exist as well as we have in the past.

With all the concerns, there are great reasons for hope.  Notwithstanding all our problems, few nations allow such opportunity and security as we enjoy.  The simple fact is that we can do much in our individual situations to protect ourselves and to progress.

The reason our firm limits its practice exclusively to estate planning is that we can truly help clients protect their assets, their legacies, their future plans, and even their hope.  Obviously, not all estate plans are created equal, but with proper planning that includes provisions for very important recent changes in state and federal laws, people can be sure their future, and the legacy and estate they leave will be much more secure.

 

theron-hallContributed by Morris Hall PLLC, Mesa, Phoenix and Scottsdale Estate Planning Attorney and Senior Partner Theron M Hall Jr.

About Morris Hall, PLLC:
At Morris Hall, PLLC we have focused our legal practice on estate planning for over 45 years.  Along with estate planning, our attorneys help clients and their families with matters of probate, trust administration, wills, power of attorneys, business planning, succession planning, legacy planning, charitable gifting and other important legal aspects.  We also have divisions in financial, real estate and accounting to help you incorporate all of your planning together, ensuring that everything works perfectly for your needs and situation. Our Arizona offices are located in Phoenix, Mesa, Scottsdale, Carefree, Tucson, Oro Valley, Green Valley, Prescott, Sedona, Flagstaff and Arrowhead.  Our New Mexico offices are located in Albuquerque, Las Cruces and Santa Fe.  Contact us today at 888.222.1328 to schedule an appointment!

This blog should be used for informational purposes only.  It does not create an attorney-client relationship with any reader and should not be construed as legal advice.  If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.

Taxes and the Presidential Race – Donald Trump

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We had previously discussed what our taxes may look like if Hillary Clinton was elected president.  Last Monday’s debate demonstrated how different the two candidates are.  Whoever is elected, it is important to understand the impacts and effects of the tax law changes to you, and potentially your estate plan.

The director of education at the American Academy of Estate Planning Attorneys, Steve Harnett, wrote a nice piece summarizing Donald Trump’s Tax Plan.

In the estate tax realm, The Donald plans to eliminate the tax altogether.  On its face that seems like a good thing (less taxes is typically good for all of us).  However, this needs to be put into perspective.  The current federal estate tax exemption amount (i.e. no tax on any dollars less than the exemption) is $5.45 million.  At this level there will be about 10,800 estate tax returns filed in 2015, of which only 5,300 will actually owe a tax.  Only multi-multi-millionaires and billionaires will pay an estate tax.  This is not even the “1%”.  This is the 0.2%!  The other 99.8% of the people will not pay an estate tax.  So Donald’s plan is to eliminate something that has effectively already been eliminated.

Donald does propose to get some of the tax back on estate valued over $10 million by not allowing a “Step-Up” in cost basis.  This will create additional capital gains tax upon the estates selling the assets.

As for income tax, the Donald looks to be cutting taxes across the board, though his actual tax proposal seems to be continually changing.  As Steve Harnett points out, the reductions for low income earners is about 1.2% and those with higher earnings would receive a 10.2% reduction.  The one good thing with Donald’s proposal is a simplification of the tax brackets, cutting them from 7 to 3.  For a more detailed analysis you can look here.

Taxes are the bane of our existence. However, living in a civilized society has a cost (we just hope the government spend those dollars wisely).  So taxes are inevitable.  In a presidential election year, the changes in the tax laws is inevitable as a new president is sworn in.  We, as citizens, just need to be ready for the new laws’ impact on us.

 

jim-plitzContributed by Morris Hall PLLC Albuquerque, Santa Fe and Las Cruces Estate Planning Attorney and Partner, James P. Plitz.

What the Attorneys of Morris Hall, PLLC Can Do For You:
The attorneys at Morris Hall have 100’s of years of combined experience ensuring that families’ assets are protected from probate, unnecessary taxes, creditors, ex-spouses and Medicaid spend-down.  Our Arizona offices are located in Phoenix, Mesa, Scottsdale, Carefree, Tucson, Oro Valley, Green Valley, Prescott, Sedona, Flagstaff and Arrowhead.  Our New Mexico offices are located in Albuquerque, Las Cruces and Santa Fe.  Contact us today at 888.222.1328 to schedule an appointment!

This blog should be used for informational purposes only.  It does not create an attorney-client relationship with any reader and should not be construed as legal advice.  If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.

 

Taxes and the Presidential Race – Hillary Clinton

By | Election | No Comments

Election years create a lot of uncertainty when it comes to laws – especially tax law.  And though the pundits talk about this year’s race being unlike anything in our history, the tax uncertainty is still a common thread tying back to elections past.

It is important to understand the various taxes that could change, and the impacts each will have on you, and potentially your estate plan.

The director of education at the American Academy of Estate Planning Attorneys, Steve Harnett, wrote a nice piece summarizing Hillary Clinton’s Tax Plan.

The big takeaway from Hillary’s estate tax proposal is that it would be the first time in the United States’ history that the applicable exemption amount would move backward.  Currently a person passing away this year receives an exemption from estate tax, at the federal level, for the first $5.45 million dollars.  Hillary’s plan cuts that to $3.5 million (still a large number, but moving in the wrong direction).  She also proposes to increase the rate from 40% to 45%.

As for income tax, Ms. Clinton targets the rich – those with incomes above $750,000.  It is estimated that if you are in the top 1% of tax payers, your tax bill will rise $78,000.  However, under Ms. Clinton’s plan, those who earn less than $300,000 will face no increase.  You can see the Tax Policy Center for more details.

Elections create change.  Some for the better, some not so much.  However, with the right advice and proper estate planning, these and other future changes may have minimal effects.  But the key thing is to sit down with one of our attorneys to have your plan reviewed to ensure it works for you, and mitigates future changes.

Next week, I will be writing on Donald Trump’s tax plan.

 

jim-plitzContributed by Morris Hall, PLLC Albuquerque, Santa Fe and Last Cruces Estate Planning Attorney and Partner, James P. Plitz.

Why Choose Morris Hall, PLLC:
You have a number of options when it comes to estate planning, so why pick Morris Hall?  First off, estate planning and asset protection are a very complicated endeavor and you should only trust someone who focuses exclusively on those matters.  Also, Morris Hall is a proud member of The American Academy of Estate Planning Attorneys (AAEPA) which provides us additional support, advanced training, tools and information that is not available to others – which means that we can better protect your assets and your loved ones.  We are one of only three firms in Arizona that belong to the AAEPA and are the only firm in New Mexico that has been granted membership.  If you have assets and loved ones that you want to protect, you are in good hands with Morris Hall.  Contact us today at 888.222.1328 to schedule an appointment!

 

This blog should be used for informational purposes only.  It does not create an attorney-client relationship with any reader and should not be construed as legal advice.  If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.