One strategy to get your children prepared to handle the assets they’ll eventually inherit, is to have them meet with your professional advisors. They can explain what you’ve been doing.
FedWeek’s recent article entitled “Preparing Your Heirs for Their Inheritance” suggests that your children should meet with your accountant for an explanation of any tax planning tactics that you have been implementing. That way those tactics can be continued after your death. If you have a broker or a financial planner, your heirs should meet with this adviser for a review of your portfolio strategies.
Know that if you hold investment property, it might pose special problems.
While your investment portfolio can be split between your children, who can follow their individual inclinations, it’s tough to divide physical property. Your kids might disagree on how the property should be managed.
With any assets—but especially rental property—you have to be realistic. Ask yourself if your children can work together to manage the real estate.
If they cannot, you may be better off leaving your investment property to the one child who really can manage real estate and leave your other children non-real estate assets instead. You might also provide that some of your children can buy out the others at a price set by an independent appraisal.
Another way you can help is by proper handling of appreciated assets, such as stocks.
If you purchased $20,000 worth of XYZ Corp. shares many years ago, those shares are worth $50,000. If you sell those shares to raise $50,000 in cash for retirement spending, you’ll have a $30,000 long-term capital gain.
You might raise retirement cash, by selling other securities where there’s been little or no appreciation.
That will allow you to keep the shares and leave them to your children. At your death, your shares may be worth $50,000, and that value becomes the new basis (cost for tax purposes) in those shares. If your children sell them for $50,000, they won ‘t owe capital gains tax.
All of the appreciation in those shares during your lifetime will not be taxed.
One of the main goals of our law practice is to help families like your plan for safe, problem free, and successful transfer of assets to the next generation. Call our office today to schedule a time for us to review your estate plan and identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.
Reference: FedWeek (March 31, 2021) “Preparing Your Heirs for Their Inheritance”