In Modern Estate Planning Basis Plays Important Role

The American Taxpayer Relief Act of 2012 raised the federal estate tax exemption to $5 million for each individual.  This amount is adjusted to inflation which means an individual can transfer up to $5,430,000 before being effected by the estate tax.  The change to estate tax law has shifted the focus of many estate planners from “estate tax” planning to “basis” planning.

“Basis” is an income tax concept which the IRS uses to calculate the tax a person owes after selling an asset.  Individuals and couples should consider the fair market value of their assets before deciding on whether to give the asset away as a gift or transfer it at death.   Estate Planners should be prudent about considering basis in order to reduce the income tax liability that a client will face.

See Virginia Carter & Zachary Lamb, Ward and Smith, P.A. Modern estate planning – It’s all about that basis, May 27, 2015.