A Simple Way to Avoid the CAPITAL GAINS TAX Creep!

The tax that often creeps up and bites people is the capital gains tax. Capital gains tax is paid when you sell an asset that has appreciated in value. For example, if you buy stock for $20,000 and later sell the stock for $100,000, you will have $80,000 of capital gain and you must pay tax on this gain.

 
When you die, the basis of your assets will be “stepped up.” Your heirs will get a new basis. Your heirs’ basis will not be what you paid for the asset. Your heirs’ basis will be the fair market value of the asset on the date that you died. Note that this basis rule is different if you donate appreciated assets during your lifetime. The donee does not receive a step up in basis on stock that is given to him or her during the donor’s lifetime.

 
For this reason, many people choose to “hold on” to their appreciated assets and let their heirs inherit them at the stepped-up basis (at death), rather than donating appreciated assets to heirs during life causing donees to have a carry-over basis.

 

If you are interested in developing your legal estate plan, please email me at laura@lpochelaw.com or call my office at 225-224-8099.  I look forward to the opportunity to assist you.