L E G AC Y


up to $500,000, while the basis


on the other half would remain at $50,000, or half the $100,000 initial cost, for a total basis of $550,000. If the surviving spouse sold the house, he or she would pay capital gains on $450,000, or $1 million minus $550,000. Some states impose their


own estate taxes, which can also impact the decision of whether to try to minimize estate taxes or capital gains taxes. In states with relatively low exemption levels, it often makes sense to place more effort on reducing the size of one’s estate than on lowering capital gains. “In these states, more traditional trust planning may be needed to avoid losing the state estate-tax exemption,” Heine says. Similarly, taxpayers whose


estates will exceed the federal exemption level will want to weigh the benefi ts of reducing the sizes of their estates, versus the advantages of holding on to assets until their death and leveraging the step-up rules to cut the capital gains tax. Step-up rules can come into


“For those assets that


have increased in value


signifi cantly, it can make sense to hold them until death,


so you receive that step-up.”


play in another way as well: Some individuals use the assets they own as collateral for loans when they need income. That way, they can avoid selling the assets and generating capital gains tax. “You want to protect those assets and not have to liquidate them,” Heine says. Of course, the decision to do this should factor in the need to repay the loan. Planning for estate and capital


gains taxes remains a complex endeavor. Your Regions Wealth Advisor can connect you with specialists at Regions to help you formulate strategies that work for you. p


1


Joint Committee on Taxation, “History, Present Law, and Analysis of the Federal Wealth Transfer Tax System,” March 16, 2015.


CHANGES AHEAD?


Early in 2015, President Obama proposed capping the level of capital gains that could be bequeathed tax- free at $100,000 per person. While it’s unclear whether there’s enough political support in Congress to pass such legislation, families should keep an eye on it, Heine says. “If this does pass, it will have a huge impact on estate planning,” she adds. p


SUMMER 2 015  R EG ION S I N S IG H T S 15


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