The Real Tax to Worry About, Elder Law Attorney, Woodstock, GA

The federal estate tax might get most of the political headlines, but the truth is that it affects a relatively very small number of Americans. Of far more concern for most Americans is how the federal capital gains tax will impact their estates.

If you listen to enough politicians speak, you might come away with the impression that the biggest concern for American estates is the federal estate tax. This might lead you to believe that if your estate is smaller than the $5.45 million individual exemption, then you do not need to worry too much about how taxes will affect your estate.

However, there is a silent estate killer out there.

It is the federal capital gains tax, which can be as high as 33% and can have a devastating impact on estates that do not plan for it.

Recently, Market Watch offered some estate planning tips about the capital gains tax in “5 ways to protect your estate from capital gains taxes.”

The tips include:

  • Undo a Trust – Assets put into a trust to keep them out of the estate can have a greater capital gains tax cost when eventually sold.
  • Upstream Gifting – If you give an asset to an older family member, that asset will receive a step-up basis for capital gains when the older person passes away.
  • JointExempt Step-Up Trust – These special trusts allow a surviving spouse to sell an asset after a spouse passes away without having to pay capital gains tax.
  • HomeSale Tax Exclusion – If you have lived in and owned your home for two out of the last five years, you can sell it without owing capital gains on the first $250,000 of appreciation or $500,000 for married couples.
  • Like Kind Investments – Selling one type of property and using the proceeds to invest in the same type of property can allow you to delay paying capital gains tax.

To learn more about these tips for dealing with the capital gains tax visit with an estate planning attorney.

Reference: Market Watch (Dec. 25, 2015) “5 ways to protect your estate from capital gains taxes.”

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