Timely Topics

Author: Jacob Davidson

The End of Step-up Basis?

The End of Step up Basis

Posted By Jacob Davidson
June 10, 2021 Category: Tax, Step Up Basis, Upcoming Changes Of Law, Grantor Trust, Intentionally Defective Grantor Trust

The Possible Loss of Step-up Basis   A step-up in basis, or more accurately, a basis adjustment, has been a cornerstone of many estate plans throughout the years. Let’s take a look at what a basis adjustment is, how a step-up in basis works, and some recent news about its possible demise. The basis of property is a tax term and it is the amount that someone paid for it. If that property is later sold, capital gains or losses must be reported. This would be an amount taxed on the difference of the original basis amount and the amount of the sales price. However, a basis adjustment occurs when the property is inherited. Meaning, the beneficiary of that property receives it with a basis of its current fair market value instead of its original purchase price. Let’s look at an example. Nancy bought stock in XYZ Corp. in 1970. She paid $100,000 for it. It is now worth $500,000. If she sold it this year, she would have to pay capital gains tax on the $400,000 profit. Instead, if Nancy died this year and her son inherited the property, he would take the property with a basis of $500,000. He received a step-up in basis. Nancy’s son could then sell the property at its fair market value of $500,000 with no capital gains tax due. A basis adjustment can even be preserved in irrevocable trust planning. In our intentionally defective grantor trust, a basis adjustment is achieved via reserving a limited power of appointment. Per Treasury Regulation

What are Federal Benefits for Veterans, Dependents and Survivors?

What are Federal Benefits for Veterans, Dependents and Survivors

Posted By Jacob Davidson
June 08, 2021 Category: General

What are Federal Benefits for Veterans, Dependents and

New Medicaid Case Law from New Jersey

New Medicaid Case Law from New Jersey

Posted By Jacob Davidson
June 01, 2021 Category: Medicaid House Exception Transfer Child Care

New Case Law: How to Transfer your Home Without Penalty   Qualifying for long-term care Medicaid can be tricky. There are strict asset and income limits. Elder law attorneys help clients get qualified for Medicaid using variety of strategies. Some of these strategies revolve around how to plan for the client’s home. In most states (Ohio), the home is an exempt asset if the client has an intent to return home. The home is also exempt if there is a community spouse, disabled or blind child, or child under the age of 21 still living in the home. However, planning is still sometimes sought in these situations to avoid estate recovery. One planning technique is to transfer the home to a child caretaker. This planning strategy is the result of 42 U.S.C. § 1396p(c)(2), which states:   42 U.S. Code § 2F1396p(c)(2): “(2)An individual shall not be ineligible for medical assistance by reason of paragraph (1) to the extent that— (A)the assets transferred were a home and title to the home was transferred to—                 … (iv)a son or daughter of such individual (other than a child described in clause (ii)) who was residing in such individual’s home for a period of at least two years immediately before the date the individual becomes an institutionalized individual, and who (as determined by the State) provided care to such individual which

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