What to Consider When Passing on Assets to Your Loved Ones – Part IV

One of the most challenging aspects of passing on property to your loved ones has to do with tax planning. This is because it is sometimes expensive and frequently complicated to figure this out. many assets receive what is known as a step up in basis when the owner of this asset passes away

This is true if the asset appreciates after it was originally purchased. Some assets, however, do not get this step up in basis.

A step up in basis is advantageous for your loved ones when it does apply. For example, if someone purchased an asset that was originally worth $100,000 but that asset grew to $150,000 in value, the new basis of $150,000 would be in the ownership of the heir, where that individual could liquidate it immediately for the full value of $150,000 without facing tax consequences.

Assets that you may want to think twice about leaving directly to heirs include an IRA or a 401(k) because assets could be taxed when the heir withdraws funds from these accounts. As you can see, these issues can be complicated and should only be done with the insight of an experienced New Jersey estate planning attorney.