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Ranking assets included in estate plans

Minnesota residents who are involved in planning their estates might be interested in a recent article discussing tax incentives for holding on to different assets. This might be an important issue to consider if a benefactor has to choose an asset to liquidate in order to pay off certain accounts.

The central goal for this process is to minimize the tax burden that heirs and beneficiaries may face after the benefactor passes away. Generally, a person planning the estate should focus on possible income taxes rather than estate taxes because federal estate taxes do not apply unless a benefactor's wealth is above a certain threshold. If the benefactors are a married couple, the threshold is $10.6 million. b

According to the article, which was based on a report issued by AllianceBerstein, the assets that should be liquidated first are depreciated securities. This allows the seller to claim a capital loss deduction, which would no longer be available if the owner dies. However, by contrast, highly appreciated stocks should be one of the last assets that are liquidated. Under this metric, the most important asset to hold on to is depleted partnerships.

Estate planning can be a vastly complex task. In addition to tax mitigating strategies, drafting the necessary paperwork to outline one's wishes can be a difficult process. However, a lawyer that is familiar with the procedures for forming trusts and drafting wills may be able to help a benefactor who is planning his or her estate. That lawyer may be able to help a client review the relevant financial records and could develop a strategy that caters to the client's wishes.

Source: Forbes, "Estate Planning: A Ranking of Good Assets and Bad Assets", William Baldwin, August 25, 2014

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Jeffrey P. Scott & Associates

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