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Determining assets to hold in a California estate

When an individual passes on, the person’s family may be the beneficiaries of an estate plan. However, it is important to understand how assets will be valued before and after being placed into an estate when the benefactor is considering liquidating some before his or her death. This is because some assets may expose heirs to higher taxes than necessary.

Collectibles should be kept in a portfolio for as long as possible. This includes things like gold and artwork. Holding on to these assets is beneficial because the gains accumulated over the long term are taxed at a percentage. However, when a person dies and the asset is transferred to an heir, the tax on the appreciation disappears. The same principal applies to highly appreciated stocks, but if necessary, the stocks should be liquidated before the collectibles because the gains tax on collectibles is typically higher than the tax levied against shares.

The opposite strategy should be applied to stocks that have depreciated because the loss of value at the time the sale is made can be claimed as a capital loss deduction. This minor benefit to depreciated stock disappears in the same way that the gains tax is avoided upon the death of the benefactor.

An estate planning attorney may be able to help an individual decide which assets to sell and which ones to hold when necessary. Estate planning attorneys may have the ability to analyze an individual’s estate. This may make it easier to construct an estate plan that may reduce the amount of taxes that heirs may have to pay.

Source: Forbes, “Estate Planning: A Ranking of Good Assets and Bad Assets“, William Baldwin, August 25, 2014

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