Recently Enacted Legislation Changes Estate Transfer Considerations
New tax legislation passed by Congress on January 1, 2013, has changed considerations for when to transfer wealth. The gift and estate tax exclusions enacted by the new legislation have spurred discussion on what estate planning options would be most beneficial. Paul S. Lee recently presented his new approach, “freebasing,, at the 48th Annual Heckerling Institute on Estate Planning.
Lee’s approach involves comparing the benefit between the income tax costs of transferring property while alive versus the step-up in basis savings of transferring the property at death. This consideration depends on the type of property to be transferred and the state the testator and the intended beneficiaries live. Property that will likely benefit from the step-up in basis include, low-basis stock, intellectual property, art, gold, collectibles, and fully depreciated investment real estate. Property that do not benefit from the step-up in basis include, cash, variable annuities, and pretax IRAs and 401(k)s.
See Deborah L. Jacobs, Freebasing Your Estate, Forbes, Feb. 12, 2014.