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Estate Planning: Wills & More

07/22/2019 Lisa Riccardi

The process of preparing an estate is a crucial but often times uncomfortable and overwhelming task. However, a fundamental understanding of this process can go a long way in subduing your fears. Creating a will is an effortless step in securing your estate. The will serves as a blueprint for the allocation of your assets, stating to whom or where the assets should pass at death. It is important to be knowledgeable of the various types of assets you own.  One type of asset that is often forgotten are appreciated stocks.

Why review your appreciated stocks?

Appreciated stock can be a significant component in one’s overall asset portfolio.  At death, the value of the stock “steps up” to fair market value, and heirs receive the stock at the appreciated value. Therefore, when the stock is sold, the potential gain is lower. Under current estate law, stepped-up-basis is very valuable and can result in less income tax paid in the future. If the stock is sold prior to death, the stock holder would recognize gain based on original purchase price, therefore trigging an income tax on that appreciation (gain). Retaining stock, especially appreciated stock, is a wise decision when it pertains to estate planning.

Should you donate appreciated stocks?

Appreciated stock is also a great asset to contribute to charitable organizations during one’s life.  When the stock is directly contributed to charity, there is no sale of that stock, therefore, no income tax is due on the appreciation.  The charity receives the stock at its current value and can sell the stock with no income tax consequences, as it is a tax exempt organization. The stock holder many also receive a charity deduction for that contribution.

Other assets to analyze

Some assets pass based on beneficiary designations at death.  Individual retirement accounts (IRAs), 401ks, and annuities, to name a few, all pass based on designations provided prior to death.  It is imperative that you review the designations regularly to be sure they are still valid. If there are no listed beneficiaries at death, the estate becomes the beneficiary.  Once in the estate, liquidation of the account could result in a higher tax bill.

Be proactive

Aggressive estate planning can be effective without being complicated.  Creation of a simple will with personal directives is sufficient action.  Regular review of assets can provide a picture of what legacy will be left at death, as well as what currently needs to be updated to achieve the respective goals. 

Lisa Riccardi is a Shareholder with VonLehman CPA & Advisory Firm and a member of the Tax Group. Lisa is the firm’s expert in handling estate related planning and specializes in income tax compliance and planning for high-net worth individuals, trusts, closely-held businesses and retirees. Contact Lisa at lriccardi@vlcpa.com or by phone at 859-331-3300.

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