Estate Planning Blog

Can You Explain the Concept of Step-Up Basis?
Can You Explain the Concept of Step-Up Basis?

Can You Explain the Concept of Step-Up Basis?

Can You Explain the Concept of Step-Up Basis?

If you inherit assets—especially real property—you need to understand the step-up in basis rules. These rules can save you a lot of amount of money on capital gains and depreciation recapture taxes.

Motley Fool’s recent article on this subject asks “What is a Step-Up in Basis?” The article explains that step-up in basis has significant implications for inherited property. When an asset is inherited because the original owner has passed away, in many cases, it’s worth more than when it was first purchased. To avoid a huge capital gains tax bill when the inherited property is sold, the cost basis of the asset is modified to its value at the time of its owner’s death. This is called a step-up in basis. Note that this only applies to property transferred after death. If a property was gifted or transferred before the original owner dies, the original cost basis would transfer to the recipient.

Can You Explain the Concept of Step-Up Basis? This is a gigantic tax benefit for estate planning, regardless of whether you go ahead and sell the inherited asset immediately or hold on to it for a time. While a step-up in basis can let heirs avoid capital gains taxes, it doesn’t allow heirs to avoid estate taxes that apply to big inheritances.

The estate tax this year is imposed on property in excess of $11.4 million per individual and $22.8 million per married couple. Therefore, if you and your spouse leave a $25 million estate to your heirs, $2.2 million of this will still be taxable, even though your heirs’ cost basis in assets they inherited will be stepped up for capital gains tax purposes.

There are many strategies that a qualified estate planning attorney can advise you on to avoid estate taxes, but step-up in basis doesn’t exclude the value of inherited property from a taxable estate all by itself.

There are two significant ramifications of stepped-up cost basis regarding inherited real estate assets. First, like with other assets, you don’t have to pay capital gains on any appreciation that occurred before you inherited the property. Selling an investment property after years of holding it, can mean a massive capital gains tax bill. Therefore, a stepped-up cost basis can be a very valuable benefit. A step-up in basis can also give you a larger depreciation tax benefit. The cost basis of residential real estate can be depreciated (deducted) over 27½ years: a higher number divided by 27½ years is a greater annual depreciation deduction than a smaller number would produce.

Real estate transfers are pretty complicated, so work with a qualified estate planning attorney.

Reference: Motley Fool (November 21, 2019) “What is a Step-Up in Basis?”


From Gentle Persuasion to a No-Nonsense Approach, Talking About Estate Plans
From Gentle Persuasion to a No-Nonsense Approach, Talking About Estate Plans

From Gentle Persuasion to a No-Nonsense Approach, Talking About Estate Plans

From Gentle Persuasion to a No-Nonsense Approach, Talking About Estate Plans.

Sometimes the first attempt is a flop. Imaging this exchange: “So, do you want to talk about what happens when you die?” Answer: “Nope.” That’s what can happen, but it doesn’t have to, says The Wall Street Journal’s recent article “Readers Offer Their Advice on Talking to Aging Parents About Estate Plans.”

Gentle Persuasion Talking About Estate Plans. Many people have successfully begun this conversation with their aging parents. The gentle persuasion method is deemed to be the most successful. Treating elderly parents as adults, which they are, and asking about their fears and concerns is one way to start. Educating, not lecturing, is a respectful way to move the conversation forward.

Instead of asking a series of rapid-fire questions, provide information. One family assembled a notebook with articles about how to find an estate planning attorney, when people might need a trust, or why naming someone as power of attorney is so important.

Gentle Persuasion Talking About Estate Plans. Others begin by first talking about less important matters than bank accounts and bequests. Asking a parent for a list of utility companies with the account number, phone number and if they are paying bills online, their password, is an easy entry to thinking about next steps. Sometimes a gentle nudge, is all it takes to unlock the doors.

For some families, a more direct, less gentle approach gets the job done. That includes being willing to tell parents that not having an estate plan or not being willing to talk about their estate plan is going to lead to disaster for everyone. Warn them about taxes or remind them that the state will disburse all of their hard-earned assets, if they don’t have a plan in place.

One son tapped into his father’s strong dislike of paying taxes. He asked a tax attorney to figure out how much the family would have to pay in estate taxes, if there were no estate plan in place. It was an eye-opener, and the father became immediately receptive to sitting down with an estate planning attorney.

A daughter had tried repeatedly to get her father to speak with an estate planning attorney. His response was the same for several decades: he didn’t believe that his estate was big enough to warrant doing any kind of planning. One evening the daughter simply threw up her hands in frustration and told him, “Fine, if your favorite charity is the federal government, do nothing…but if you’d rather benefit the church or a university, do something and make your desires known.”

For months after seeing an estate attorney and putting a plan in place, he repeated the same phrase to her: “I had no idea we were worth so much.”

Between the extremes is a third option: letting someone else handle the conversation. Aging parents may be more receptive to listening to a trusted individual, who is of their same generation. One adult daughter contacted her wealthy mother’s estate planning attorney and financial advisor. The mother would not listen to the daughter, but she did listen to her estate planning attorney and her financial advisor, when they both reminded her that her estate plan had not been reviewed in years.

Reference: The Wall Street Journal (December 16, 2019) “Readers Offer Their Advice on Talking to Aging Parents About Estate Plans”

From Gentle Persuasion to a No-Nonsense Approach, Talking About Estate Plans.

Helpful Links for readers of this Elder Law Blog
Helpful Links for readers of this Elder Law Blog

Helpful Links for readers of this Elder Law Blog

Helpful Links for readers of this Elder Law Blog.
Below is my Facebook link and Youtube link.  My Facebook Office page has more than 150 videos on elder law topics. Take a look.
My website has information and my blog has about 200 posts. My youtube channel is new and we are migrating videos onto it. Please subscribe so that you do not miss new information as posted. I have a series on Elder law, on Medicare on estate planning and guardianship. Plus a whole lot more. You would really help me out as well because I can get the ability to name my channel instead of having that long letter chain after it (see below). I need 100 subscribers or more. That would be a big help.
As always, I am available rather easily for a telephone discussion. Please schedule at Many existing clients text with me about various situations and circumstances and I am always available to lend an “ear” and a helpful word or two. The inquiries range from Probate, L&T, real estate to Guardianship and Incapacity to Elder Law issues. Try me out!
Resources for Healthy Aging
Resources for Healthy Aging

Resources for Healthy Aging

Resources for Healthy Aging. You worked hard for decades, and now you get to retire. You have daydreamed about what you want to do during these hard-earned years. It would be tragic if you were too sick and frail to get to do those things, like play with the grandchildren, travel, enjoy your hobbies and other activities. We all want to be healthy, but it is easier to achieve that goal with a little help. The Department of Aging, a federal agency within Health and Human Services (HHS), provides information on resources for healthy aging.

The Eight Pillars of Health and Wellness for Older Adults

You do not have to tackle all eight of these factors on Day One. Getting stressed and overwhelmed will hurt your health, not help it. Work your way through this list at a comfortable pace. Make changes to your lifestyle that you can continue over the long haul. Resources for Healthy Aging. Consistent habits will give you the most significant benefit.

  1. Move around and exercise. It is a safe bet that the people who live into their nineties and triple digits did not spend their sixties and seventies as couch potatoes. Keep moving. Getting a little physical exercise every day is essential for long-term health. Choose low-impact activities, like walking and swimming, that have a low risk of injury. Be careful to avoid falls that can rob you of your mobility and independence.
  2. Stay involved. Loneliness is toxic to your physical and mental health. Find something in your community that brings you joy, whether it is a house of worship, animal shelter, or organized senior events at the local recreation department. Sign up and meet new people. Stay involved.
  3. Eat right. You know the adage, you are what you eat. You cannot have peak health, if you eat and drink highly processed foods and beverages with little nutritional value. Make sure that you include fresh fruits and vegetables into your routine every day. If you cannot get fresh, choose frozen over canned foods.
  4. Access benefits. Tap into all of the benefits and services you have earned over the years. Social Security, Medicare, and Medicaid can go a long way to keeping you and your wallet healthy. If you do not apply for and fight until you get all of the benefits for which you are eligible, you are leaving money on the table and draining money from your retirement savings. Too many people do not go after the income and services they qualify for, in the form of veteran benefits, state and county programs and non-profit agencies.
  5. Respect mental health issues. For too long, the topic of mental health carried a stigma. People did not talk about it. We now realize that mental health has a significant impact on your physical health and quality of life. Talk to your doctor about your mental health concerns.
  6. The little grey cells. Keep your brain healthy. Like everything else, you need to exercise your brain to keep it fit. Be a lifelong learner. Practice a healthy lifestyle. Read books and do word puzzles. Just do not let your brain be idle.
  7. Medical knowledge. If certain diseases run in your family, go to reputable websites like the Mayo Clinic and the National Institutes of Health to educate yourself on those conditions. You might be able to prevent a debilitating illness. If nothing else, you can learn how to manage a medical condition.
  8. Medication management. Have a frank talk with your doctor about all of your medications. If you have to take three drugs to handle the side effects from another prescription, your doctor should explore whether a different medication might be a better option. Make sure that your various prescriptions, supplements and natural remedies do not conflict with each other.

One additional piece of advice: be kind. Be kind to others and to yourself. Help people and they will reciprocate in kind. You will create a better community, that is worth living in during your golden years.


Health and Human Services. “Healthy Aging.” (accessed November 26, 2019)

Resources for Healthy Aging

The Medicaid Medically Needy “Spend-Down Program” – What You Need to Know
The Medicaid Medically Needy "Spend-Down Program" - What You Need to Know

The Medicaid Medically Needy “Spend-Down Program” – What You Need to Know

The Medicaid Medically Needy “Spend-Down Program” – What You Need to Know.

If you’ve been denied Medicaid benefits because you have too many assets or too high an income, don’t give up. There are available programs that may enable you to qualify for Medicaid benefits, despite this setback. Each state may offer different programs, and the Affordable Care Act (ACA) has added new ways to obtain coverage. This article addresses the “spend down program” offered in every state.

Medicaid Spend-Down Program – The Basics

To qualify for Medicaid benefits, your income and assets may not exceed a certain amount set by law. If these items do exceed the legal limits, you may still qualify after a spend-down period. The medically needy spend-down program helps individuals over the age of 65, and some younger individuals with disabilities. To be eligible for this program, you must not be receiving public financial assistance.

Exempt & Non-Exempt Assets

It is not necessary to sell off everything you own to qualify for the spend-down program. You may keep a certain amount of “exempt assets,” such as the home you live in, your car (used for transportation), household furniture, clothes, jewelry and other personal items. None of these assets affect your eligibility, regardless of their value (unless you have high equity, say $1 million in an asset, in which case you may need to spend that down).

Non-exempt assets, on the other hand, do affect your eligibility for the spend-down program. These assets include bank accounts, stocks, investments, and cash over $2,000 for an individual or a higher amount for a married couple.

Amount of Income You Can Have to Apply

It does not matter how much income you have when you apply. The more income you have, though, the more medical expenses you must incur before your coverage can start. The way you spend down this income is by spending it on medical expenses, until you reach the income requirements for Medicaid. Interestingly, you just need to incur medical costs. You don’t have to actually pay them.

In addition, you can pay down accrued debt to spend down your income. Therefore, paying down credit card bills, car payments, or mortgage debt can count towards your spend down. Another tactic you can use, is to pay excess monthly amounts on old medical bills.

Seeking Professional Assistance

Medicaid programs are different in each state, and the laws change frequently. If done wrong, you could end up incurring penalties instead of obtaining benefits. It may be a good idea to enlist the help of a Medicaid lawyer or elder law attorney to walk you through the process in a way that will avoid these types of penalties.


National Council on Aging. “Benefits Checkup” (Accessed November 28, 2019)

U.S. News and World Report. “How a Medicaid Spend Down Works.” (Accessed 28, 2019)


What Should I Know About Finances for My New Blended Family?
What Should I Know About Finances for My New Blended Family?

What Should I Know About Finances for My New Blended Family?

What Should I Know About Finances for My New Blended Family?

The blended family is a family dynamic that is increasingly common, which can make addressing financial issues much more of a challenge. In a blended family, a one or both spouses have at least one child from a previous marriage or relationship, and together they create what’s known as a new combined family.

CNBC’s recent article, “4 ways to help blended families navigate finances,” reports that a staggering 63% of women who remarry come into blended families, with 50% of those involving stepchildren who live with the new couple, according to the National Center for Family & Marriage Research.

The issues in a blended family can be demanding, so couples often delay having the “money talk.” This is an important piece of the family financial puzzle. Let’s look at some of the ways you can work on that puzzle:

  1. Get expert advice. Talk to an estate planning attorney about the specifics of your blended situation.
  2. Create a plan for merging relationship and money. Understanding the role money plays in combining two families is critical to the success of a healthy blended household. A basic step may be to draft a detailed plan of how the couple is going to care for one another in their marriage and in their family, in addition to how they will care for one another’s children. Try to determine the ways in which money plays a role in coming together. The more you can communicate and the more that you can exhibit a united front, even from a financial perspective, the stronger a couple will be.
  3. Collect documentation and monitor your money. It’s good to understand the work involved with the preparation and paperwork after divorce and remarriage. You’ll have a divorce decree or a domestic partner agreement, as well as instructions on child support and alimony. You also need to keep track of all the different financial accounts.
  4. Discuss your financial issues regularly. First, ask about the financial obligations to the ex-spouses. Make sure both spouses understand if there’s child support and/or alimony, as well as responsibility for paying for housing or their utility bills.

Reference: CNBC (November 23, 2019) “4 ways to help blended families navigate finances”

What Should I Know About Finances for My New Blended Family? Have the money talk; get expert advice about your specifics; create a plan for merging relationship and money; collect documentation and monitor your money and discuss financial issues regularly.

Are You Forgetting this Estate Planning Document?
Are You Forgetting this Estate Planning Document? Health Care Proxy

Are You Forgetting this Estate Planning Document?

Forbes’ recent article, “Two-Thirds Of All Americans Are Missing This Estate Planning Document,” explains that a health care directive is a legal document in which an individual writes down his decisions for caregivers in the event of illness or dementia and makes instructions about end of life decisions. It can also provide guidance on how caregivers should handle the body after death.

Health care directives are also called living wills, durable health care powers of attorney, or medical directives, but they all serve the same function, which is to provide guidance and direction on how a person’s medical and death decisions should be made.

Despite the importance of a health care directive, a 2017 study found that only 33% of all Americans have one.

A critical decision in a health care directive is selecting an agent. This is a proxy who acts on your behalf to make decisions that are consistent with your wishes. It’s important to pick an individual whose values are aligned with yours. This is your advocate on decisions, like if you want to have treatment continued or just be kept comfortable in palliative care.

Once you choose an agent, review your directive with her. This will give her guidance if and when the need for her to step in arises.

The agent’s role in the health care directive doesn’t end at death but continues to ensure that your post-mortem wishes are carried out. When the person dies, the agent takes control of the body. Prior to funeral plans, the agent must make certain that any organ donation wishes are carried out. This decision is usually shown on a person’s driver’s license, but it’s also re-stated in the health care directive.

After the donation wishes are carried out, the agent helps to make sure funeral wishes are handled properly. These instructions can be detailed in the health care directive.

Are You Forgetting this Estate Planning Document? With a health care directive put in place, you make things easier for your family and loved ones.

Reference: Forbes (December 13, 2019) “Two-Thirds Of All Americans Are Missing This Estate Planning Document”


I’m Rich! What Should I Do Now?
I’m Rich! What Should I Do Now?

I’m Rich! What Should I Do Now?

I’m Rich! What Should I Do Now?’s recent article, “Handling unexpected wealth,” says the first thing to do is to really step back and review your finances.

Did you win the lottery or a game of high stakes poker? What about an inheritance? Depending on how much you have received, you could be in a very different place financially. You should take a look at your net worth and cash flow.

What these items show you and how much access you have to your new funds will affect the extent to which your finances might change. Years ago, I represented a client that won a million dollars. The pay out was $50,000.00 per year for twenty years. A wonderful win but just shy of life changing money.

You might have received your assets through a trust, and the trust provisions will dictate how you get those assets. Depending on these instructions, you might not have control over the funds. It’s the trustee who will decide this based on the trust document.

Get a copy of the trust and review the terms with an estate planning attorney. This will give you some idea of the income the trust will provide you.

It’s a different set of issues when inheriting or receiving stock as a gift. Look at your investment strategy to see if the stock has a place in it.

This will help you decide whether to keep the stock or sell it. Instead of stock, you might have inherited real estate. The decision here is the same as to whether to sell the property or keep it.

Your inheritance may also be plain old cash. Think about your future needs and how long your money must last.

Take the time to come up with a well-thought-out plan for both your current needs and your future goals.

Finally, any newly acquired money can also affect your estate plans. Go through your plan and strategies with an estate planning attorney.

Reference: (December 12, 2019) “Handling unexpected wealth”


How Can I Protect My Real Estate Investments?
How Can I Protect My Real Estate Investments?

How Can I Protect My Real Estate Investments?

How Can I Protect My Real Estate Investments?

How can a person protect a real estate asset to ensure its value? That’s what Wealth Advisor’s recent article, “8 Reliable Ways to Protect a Real Estate Asset,” asks. The article suggests that you look at this guide for several ways to keep your investments valuable.

  1. Insurance. This is one of the most popular asset protection strategies in real estate. The protection you select for your property depends on the real estate type. You can protect your home with a homeowner’s policy and your commercial property with a business policy. Insurance will protect you against many catastrophic events.
  2. Limited Liability. An LLC for rental property can protect your personal assets from potential lawsuits. With limited liability, your home is shielded from litigation concerning your business. One strategy is to buy a house with an LLC and rent it to yourself to minimize financial risks. This will limit the odds of personal real estate asset seizure. However, consult with an attorney to avoid charges on fraudulent practices. You should also place your commercial real estate properties in different LLCs, so if one asset faces a risk, the remainder of your property will be protected.
  3. Anonymous Land Trust. You can create an anonymous land trust to avoid legal implications on your real estate property. With a trustee, you don’t need to have your name on records, so putting your house in a trust will protect your investment. This may discourage anyone from attempting to pursue a lawsuit against you.
  4. The Titling of Assets. This can also be a great protection strategy. If your spouse is an equal tenant, it provides you with an indivisible interest, so if your spouse is involved in litigation, creditors can’t claim your house because you have an interest. Ask your estate planning attorney about how this works in your state.
  5. Protection Through Debt. Debt is an affordable way to protect your real estate property because the available equity is insignificant. The low income may also discourage creditors from going after your property.
  6. Eliminating Assets. You can get rid of your real estate asset, if creditors are on your tail. A lawsuit against you can’t affect the property that’s not under your name. Ask your attorney about transferring ownership of the property to irrevocable trusts.
  7. Homestead Exemptions. In some states, the homestead laws provide full or partial protection of home equity. If the exemption is high, think about increasing your mortgage payment to promote fund protection.
  8. Avoid Risky Situations. As a real estate investor, do your due diligence. Be certain that your review contracts carefully and work with an attorney.

How Can I Protect My Real Estate Investments? Consider these property protection strategies to ensure that your real estate assets remain secure.

Reference: Wealth Advisor (November 19, 2019) “8 Reliable Ways to Protect a Real Estate Asset”