When working to minimize your family’s tax burden, it is best to start while your parents are still alive. There are several strategies to help save your parents money in their later years and limit the taxes owed after their death. One way to reduce taxes while your parents are alive is to have them sell their stocks that have losses, which may allow them to take a tax deduction. If the stock is not sold, then upon your parent’s death there will be no tax deduction for the loss. On the other hand, they should keep stocks that have gains because their heirs will benefit from the stepped-up basis rule. For retirement accounts, like an IRA, it will be beneficial to allow the funds to grow tax-deferred, further allowing the money you would have paid in taxes to earn interest for many years. It may also be wise for those families with large estates to gift assets to beneficiaries while the parents are still alive, reducing their tax liability at death. Another efficient estate planning tool is the trust, which will provide less hassle to beneficiaries. Tax efficiency is a major asset in itself both while alive and at death, so it is important to plan accordingly.
See Patrick O’Brien, How to Keep Your Parents’ Assets from the Taxman, Market Watch, January 6, 2017.
