Estate planning for the elderly

Estate Planning Estate planning provides for the disposition or distribution of assets e. Estate planning is necessary to ensure your accumulated wealth passes on to the individuals or organizations you choose and to minimize the effect of federal or state taxes on your estate. Estate planning also includes drafting a durable power of attorney, a health care power of attorney and a living will to address personal, healthcare, and estate issues during your lifetime.

Estate planning for the elderly

With only 3, estates expected to owe the tax inthe estate tax has become much less of a concern for affluent Americans looking to avoid paying tax on wealth left to their heirs. Estate planning for the elderly Your Assets Elderly clients that were affected by the low estate tax thresholds of the past were often encouraged to sell any assets, pay the capital gains tax, and then give away as much as possible with gifts and other strategies.

With many of these clients no longer required to pay estate tax, financial advisors should encourage these people to hold onto their assets to avoid paying capital gains tax.

In some cases, it even makes sense for elderly clients to take out a loan rather than sell assets in taxable accounts, particularly when interest rates are so low. Withdrawing money from traditional IRA s or other retirement plans may also be preferable, since the taxes on those accounts are largely unavoidable unless the assets are donated to charity, while capital gains taxes can be optional.

The other downside is that these trusts involve administrative fees and added complexity. By doing so, the client can avoid paying any capital gains tax at the second death and ultimately save significant sums of money, if they are exempt from paying the estate tax.

Many elderly clients that have existing trusts may want to consider getting rid of them to preserve the step-up, reduce administration fees, and simplify the estate. The only exception to the rule may be those clients living in states with so-called death taxeswhere trusts can be useful for married couples where one person is a U.

In these cases, the children would be forced to pay capital gains from the original cost basis, but these capital gains were often at a much lower rate than the estate tax, which resulted in a significant tax savings in many cases.

With the estate tax exemption going up, many elderly clients may be better off holding onto their assets. A recipient of any gift would be forced to pay capital gains tax on the original cost basis of the client, while assets received in an inheritance would have the cost basis stepped-up to the current market value.

These dynamics can result in a significant tax savings compared to gifting. While some states like Tennessee have estate tax rates as low as 9. Elderly clients that qualify for estate taxes in these states may want to reconsider how they go about distributing assets.

Estate planning for the elderly

In some cases, the old rules may still apply to them, including the necessity of setting up trusts to create portability. An Estate Planning Must: The Bottom Line Estate taxes have been easing for several years on a federal level, which has dramatically changed the rules of the game for elderly clients.

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By keeping these new rules in mind, financial advisors can help elderly clients save significantly on tax costs over the long run. The only gotchas to consider are state estate tax laws, which can still wreak havoc on plans to transfer assets to heirs.

Estate Planning Tips for Financial Advisors. Trading Center Want to learn how to invest? Get a free 10 week email series that will teach you how to start investing. Delivered twice a week, straight to your inbox.Wausau, WI Estate Planning Wausau, WI Estate Planning Attorney, Alan Hougum writes about strategic wealth planning strategies, such as wills and trusts, powers of attorney, estate trusts, Elder Law planning, Medicaid crisis planning, Medicaid eligibility and application, probate and estate administration, and more.

Advice for Investors | Estate planning is an ongoing process

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