Our client’s husband passed away a few years ago after a long, brave battle with cancer. The Financial Harvest team worked with the family to ensure her assets and legacy were protected for the next generation.
Our first step was to convert her joint brokerage account to a trust account to protect the assets from future probate costs. This will assist her sons in avoiding attorneys and a probate headache. Based on the terms of the trust, the assets will flow to the intended heirs without hindrance.
In addition, we ensured half of the assets in her trust account received their proper step-up in cost basis, cutting the unrealized gain in the account in half and resulting in half of the capital gains exposure. We also recommended she obtain an appraisal of her home to get a step-up in cost basis for half the appreciation, which will save approximately $30,000 in capital gains taxes if she ever sells her home.
Lastly, we helped her capture the tax benefits available only in the last year she could file a married joint tax return before moving to the higher single rates. We executed Roth conversions up to the top of the 22% bracket as her single rate is now straddled between 24% and 32%.
The client’s sons also began attending meetings with Mom, which gave everyone great peace of mind. The sons were able to see that Mom was settled financially while also beginning to build a relationship with the firm to ensure she is best cared for.
Over the next few meetings, we determined that her late husband’s nonqualified deferred compensation payments were being taxed as 1099 income when they should not have been. Taxes were paid on these proceeds as they were earned, and the payout should have been tax-free. After collaborating with her CPA, we were able to get $15k of erroneously paid taxes returned to the client.
