Is There an Income Tax Time Bomb Lurking in Your Client’s Estate Plan?
Posted by Robert L. Arone – As the federal estate tax exemption has ballooned from $1.5 million ten years ago to $5.43 million today, the need for estate tax planning has drastically decreased. Instead, higher income tax rates that were ushered in under the American Taxpayer Relief Act of 2012 (ATRA) have shifted the focus of estate planning to a new frontier: income tax basis planning. In this issue you will learn what income tax basis is, how older estate plans have been deliberately designed to include an income tax time bomb, and the options your clients have to update their plans so that their heirs will receive the maximum basis. The Basics of Income Tax Basis In its simplest form, income tax basis is the cost to buy an asset, which includes the purchase price plus costs and transfer fees. Basis must be tracked because when an asset is
