Let’s say your mother has a trust that includes stocks that were your father’s. Possibly the stocks started as an employee purchase and were touched only two or three times over the years. Your mother receives a quarterly dividend from the stock, typically half in cash and half to the stock growth. So, what would the tax consequences be if this stock is left upon her death to be split among her three surviving children? Would it be better to start cashing the stock before she passes and put it in a trust account for her needs?
These are common questions we often hear from adult children who are concerned they will not have enough money for their aging parent(s) needs, tax consequences, and more. If you are having similar concerns, it’s probably time for you and your mother to meet with an estate planning attorney who can review her existing estate planning documents — her will, power of attorney, health care directive, etc. — and if she doesn’t have these, we can create the documents for her. Having those essential documents is always the first place to start.
If your mother is not competent and if you are taking care of her affairs, you may want to speak to an estate planning attorney sooner than later. As there may be steps that can be taken, or certain assets that would be better to be used first to pay expenses, which ultimately would benefit the family and/or save taxes. And if additional advisors are necessary, such as an accountant or financial planner, we can make recommendations and make sure they are included in the process.
Elder law attorney Bob Michaels offers FREE workshops you can attend with your parent(s) to begin the process of getting these documents squared away. His consultations for estate planning are free, and he offers reasonable package rates depending on your needs.
When deciding whether or not to sell stock, it is important to consider not only the potential estate tax consequences of continuing to hold the stock, but also the income tax consequences of a sale.
Keep in mind allocation of estate tax is governed by the decedent’s last will and testament, which can provide that tax is allocated pro rata so each person pays the share of tax his or her share of the estate generates, or it can be paid out of the residuary of the estate itself. Without a will or a trust, each person would have to pay his or her pro rata share of the tax generated.
This is a perfect example why meeting with an estate planning attorney while your parent(s) are still alive and healthy is so important. Every situation, every family is different. Without the assistance from someone who can assess your particular scenario, you could end up in a crisis that could have easily been avoided. If you wait, it could be too late.
Contact Bob Michaels at Smith Alling in Tacoma, WA today! Or attend one of his FREE Workshops by registering HERE.