• Not all assets are created equal in the tax code. So be sure to consider the tax consequences of each asset when doing your planning. For example, Money in IRAs Will (excluding ROTHs) and other qualified plans like pensions and annuities are subject to income tax upon inheritance unlike non-qualified investment accounts (stocks, bonds, gold and silver), real estate, art and other collectables which have their basis stepped up to the date of death value.

• IRAs and qualified plans. It’s generally better to make whoever you want a direct beneficiary of these assets rather than making your estate the beneficiary. This creates tax choices to each beneficiary. For example: Son A could choose to take all the money right away and pay the tax; Son B could take the money over 5 years, thereby controlling and lowering his tax bracket on which funds are taken, and Smart Daughter could take her’s in equal payment over her lifetime.

• An IRA or pension can have multiple beneficiary’s and be bifurcated (divided) after death by the beneficiaries.

• IRA and other qualified plans can be rolled into a spouse’s IRA upon death of the owner, but they can not be rolled into any other beneficiary’s IRAs. Other beneficiaries can however roll them into a beneficiary IRA.

• If you own property jointly with your spouse, the cost basis of that property steps up to the FMV (Fair Market Value) upon death of your spouse. This step-up affects the cost basis of your spouse’s half, not yours. For example, Jim & Jane bought their home in 1970 and paid $50,000. Over the years they did $25,000 in Improvements, so their cost basis when Jane died in 2018 was $75,000. Upon Jane’s death, Jim had the house appraised and the appraised value on Jane’s date of death was $700,000. Jim’s new basis is $406,250. This is computed by computing the step-up which is the value of Jane’s half at her date of death $350,000 plus Jim’s half their joint basis of $37,500.

• All assets that are inherited are consider held long term for tax purposes, regardless of how long or short the asset was held by the deceased.

• Life insurance owned by your estate is added to the taxable value of the estate, so take this into account if your estate may be taxable. For 2018 estates over $11,180,000 are taxable. This amount is adjusted for inflation annually.

• Transfers between spouses are unlimited (not subject to the $11,180,000 limit) unless the spouse is not a U.S. Citizen. Special arrangements need to be made when one or both spouses are Not U.S. Citizens.

Pig Banks with Assets