Billy and Bonnie

Billy and Bonnie are feeling good. As we’ve written over the past few weeks, they now have living trusts to avoid probate, know that their son would save capital gains taxes if he sells the Happy-Cola stock he will receive after their deaths, and do not have to do mess around with other complicated planning to keep from giving Uncle Sam inheritance taxes after their deaths.

Billy knows he’s given Bonnie a gift that will keep on giving even long after he is gone. Bonnie treasures how Billy ‘went over the line’ again when he bought her this present of planning ahead.

Just like all the other gifts he’s found for her over the years, Bonnie says she doesn’t ‘deserve’ it. But she is happy to have it, because it is for her whole family.

This time, Billy just went right ahead and gave her something that she knows protects their two grown-up babies, their grandbabies, and even Billy himself. Now they can go back to sit on their front porch rocking together, with Billy just watching Bonnie’s hair turn gray - at peace together for as long as they have.

Wynonna Judd would surely be proud of her Billy figuring out what Bonnie needed before Bonnie even realized she wanted it. Bonnie came first with Billy; Billy and their family came with Bonnie. So Billy had every reason he could possibly need to keep going over the line to care for them all.

For advice about taking care of your own family’s future, please call us for an estate planning appointment at (815) 436-1996. ©2014 Gruber Law Office, Ltd.

Billy and Bonnie are working on minimizing future taxes for their family.  Last week, we wrote about how stepped-up basis for their son, Junior, on the Happy-Cola stock they plan to leave for him after Billy’s death would save capital gains tax.

In short, because Billy originally bought those shares in the 1950s when they were much cheaper, Billy would have to pay about $20,000 in capital gains taxes if he sold at today’s prices.  But Junior would receive ‘stepped up basis’ by being given credit for ‘buying’ the stock for its value of the date Billy died.  That would eliminate the entire $20,000 tax. 

Billy asks, “Why not give it to Junior now?”  He and Bonnie would like to enjoy Junior’s surprise at receiving it as a birthday present and hear about his fun investing it going forward. 

The problem is that if Billy gave it to Junior now, before Billy’s death, Junior will receive what is called “carry-over basis” instead.  That would mean that Junior’s basis in the stock would be Billy’s old basis (the original purchase price) and so have to pay capital gains tax just the same as Billy. 

Junior would also have to show the IRS what Billy paid for the stock in order to avoid paying an extra $200 of tax.  Billy is a wonderful dad, but his record keeping a bit less so…

For advice about taking advantage of planning opportunities for your family’s future, please call us for an estate planning appointment at (815) 436-1996. 

©2014 Gruber Law Office, Ltd.

Billy and Bonnie are working on keeping taxes to a minimum for their family when they inherit Billy and Bonnie’s leftover money and property after their deaths. 

‘Stepped up basis’ means that if Billy and Bonnie’s son, Junior, sells his inherited shares of Happy-Cola stock Billy purchased around the 1950s after Billy’s death, Junior will save capital gains tax. 

In last week’s column, we calculated what Billy would have to pay at least $20,000 in federal and Illinois capital gains taxes if he sold his Happy-Cola holding, because he invested only $1,000 buying his shares in 1952.  They have been an amazing investment.  They are now worth $101,000. 

The $100,000 difference between Billy’s purchase price (his investment or ‘basis’ in the stock) and his sale price is Billy’s profit or ‘capital gain.’ 

But let’s suppose that Billy died today and had left the stock to his son, Junior.  Junior’s investment in the stock would be considered to be whatever the fair market value of the stock was at the date of Billy’s death.  So $101,000 would be Junior’s so-called “stepped up” basis. 

Thus, when Junior sells the stock, he should save at least $20,000 in capital gains tax – and potentially piles of paperwork. 

For advice about “using death” to possibly reduce taxes for your family, call us for an estate planning appointment at (815) 436-1996.

©2014 Gruber Law Office, Ltd.

Billy and Bonnie are working on keeping taxes to a minimum for their family when they inherit Billy and Bonnie’s leftover money and property after their deaths. Although surprised when they added everything up, Billy and Bonnie are millionaires.

Sadly, they are not multi-millionaires, and it is unlikely they will ever have over $2 million. Happily, though, that means they do not have to worry about their family paying estate taxes to Illinois or the U.S. government after their deaths.

Billy wants to save any unnecessary income taxes for his family. And there are certain taxes you can ‘avoid’ by dying. Since he knows he must die eventually, he sees no problem in planning to maximize the advantage for his family.

To understand it, we must calculate the taxes he would pay if he sold all of his Happy-Cola stock shares that he bought in the 1950s for $1,000. Awesomely, after stock splits and price increases, they are now worth about $101,000.

If Billy sells, he will be taxed on $100,000 of profit – capital gain in tax lingo. His capital gains tax bill would be at least $20,000, 15% to the feds and 5% to Illinois.

If he leaves the stock to his son after death, Junior would be able to completely avoid the capital gains tax because of ‘stepped up basis’ rules.

Stepped up basis is not easy to explain in a sentence or two, so will try to do that with our whole column next week. For advice about minimizing estate and related taxes for your family after your death, please call us for an estate planning appointment at (815) 436-1996.

©2014 Gruber Law Office, Ltd.

Billy and Bonnie have been planning for the future of their family by setting up living trusts that could both save costs after their deaths and provide for easier financial management in the event they become incapacitated before their deaths. 

Those two things are good, of course, but Bonnie and Billy have really been looking forward to coming up with planning how to leave their remaining assets after their deaths.  “That’s a fun thing to think about, really, because it’s about what good you can do with your money just when your family is having to live without being able to see you anymore,” Bonnie explains.

Their own children are doing very well for themselves; she and Billy already helped them through college, and they are employed, settled and happy. Billy and Bonnie plan to leave their adult children half of their estate.

The other half is even more fun to plan.  They will create trusts for their grandchildren’s education, where it will also be protected from their grandchildren’s creditors.  Then, half of each grandchild’s leftover trust money will be given to him at age 26, with the other half to be given to him at age 35, “when each one will be old enough to know to invest it wisely, rather than simply spend it,” says Billy.

To begin learning about how you make positive plans for your own family, call our office at (815) 436-1996 for an estate planning appointment with our office.   

© 2014 Gruber Law Office, Ltd.  

For her birthday present, Billy had promised his wife Bonnie that they would plan to take care of their family through an estate plan.  And Billy does not intend to forget about providing easier ways to care for each other while they are doing planning to benefit everyone else.

After talking over the differences between a Will-based plan and plan based on living trusts with his attorney, Billy has realized that with a living trust, he can have peace of mind about what happens if he or Bonnie become disabled.  If they handle the trust properly while they are able, the trust will be the most reliable way to avoid having to go to probate court.

For example, if he were to become incapacitated, his trust would allow Bonnie to take over paying bills and the investment decisions for his trust assets without needing to be appointed his guardian in court.

On the other hand, if Bonnie did not want to be in charge of managing the money, she could resign as trustee.  Then the next person on Billy’s trust’s list would take over those responsibilities. 

That gives her the option, depending on Billy’s condition, to concentrate more fully on what is most important to her, being with and taking care of Billy.

To begin learning about how estate planning can make some things easier for you or your family in the event of incapacity, call our office at (815) 436-1996 for an estate planning appointment with one of our estate planning attorneys.   

© 2014 Gruber Law Office, Ltd.  

Billy’s special gift this year for his wife, Bonnie, was an estate plan.  That means he has decided to plan for the possibility that either or both of them become disabled and for what happens after either or both of their deaths. 

He and Bonnie will need to work together to decide what will work best for them.  First, they need to figure out how much they actually have after 40 years of hard work.

To do this, they need to check their bank, investment and retirement statements, plus they need to look at their life insurance policies, list the stocks they own and estimate the value of their house, vehicles and any other property they own.  When they add up the amounts, they need to include the death benefit amount on the life insurance policies.

Billy and Bonnie were surprised to learn that they are actually millionaires, technically speaking.  When they add in Billy’s $350,000 life insurance policy and the value of their 40-year home, they have over one million dollars worth of assets. 

However they are well under the $5 million plus federal government estate tax exemption and are even under the $4 million Illinois estate tax exemption.  Although it would be lovely to be richer, not being so wealthy means they can have a simpler and more flexible estate plan. 

For advice to consider how to prepare for your family’s future, call our office at (815) 436-1996 to schedule an appointment.  

© 2014 Gruber Law Office, Ltd.