Three things are always changing in your Estate Plan.
What You Own.
Today we will talk about Taxes. Oh Joy, you say!
THE TAX LAWS:
Right now Congress is wrestling over what the new Tax Hike will look like. Several Versions of Taxes are under consideration for increases. Several that will directly impact your Estate Planning.
CAPITAL GAINS TAXES are paid when you sell an asset you have owned for more than a year. The most common time you are taxed for this is when you sell a stock or mutual fund. It can also come into play when you sell your house or a rental property you own. Some in Congress want the Capital Gains Tax amount to increase by 50% to 100%.
STEP UP IN BASIS: Now if your mom bought a house long ago for $25,000, and it is worth $350,000 at the time of her death, the BASIS, or what was paid when bought, “Steps Up” in valuation to it’s then current fair market value the day she died. “Step Up in Basis” keeps you from paying Capital Gains Taxes as if she had paid that fair market value when she bought it. Some in Congress want that Step Up in Basis to disappear, so you won’t get that break. You will pay Capital Gains Tax without a Step Up in Basis on mom’s house. So then you are Taxed on the difference on what she paid for the house and it’s value on death. (This keeps you from double taxation on death, so you didn’t pay this tax on top of the Estate Tax.)
ESTATE TAX: Right now few are subject to Estate Tax. A Tax on what you leave when you die to people other than your spouse. Or what your spouse leaves upon their death. Some in Congress want that Tax to come back to where it applies to most middle class people. That Estate Tax greatly lessens what you can leave your loved ones upon your death.
These are 3 major Taxes that effect your Estate Plan, or what you leave to your loved ones upon your passing.
We will see what version of modifications to the Tax Code are coming soon.
At the Law Firm of Steven Andrew Jackson, Attorney and Counsellor at Law, we have helped hundreds of families protect themselves and their loved ones, avoid Estate Taxes and Probate Costs, and keep their Estate Plans current with the law through The Customized Protective Estate Planning Solution™.