Massachusetts Estate Planning & Asset Protection Blog

A Married Couple's Asset Protection Journey

Posted by Dennis Sullivan & Associates on Thu, Aug 30, 2018



At Dennis Sullivan & Associates we were fortunate enough to be able to help a married couple, both teachers, plan for their retirement and estate planning. After being referred to us by an independent financial adviser toward the end of their careers we advised that they may want to attend one of our Free Discovery Workshops on Estate, Trusts, and Asset Protection Planning.

After being impressed with what they learned at the Workshop they scheduled their complimentary meeting to have us review their existing wills, trusts, disability, and healthcare documents. They made it clear that they had long term care insurance that would cover only $100 per day for two years (At the time cost of care at a nursing home was roughly $400 per day). Therefore, they would have had to pay $300 per day had a situation arose in the near term. $300 x 365 = $109,500 annually for two years, a total of $219,000. After the first two years of coverage lapsed, they would be responsible for the entirety of the cost of care payments. If nursing home costs did not rise, at $400 they would be looking at a nursing home bill of $146,000 annually. For comparison, the rates today are in the neighborhood of $18,000 per month and are steadily rising.

Because of the high cost of in home care and a desire to maintain control of their assets and healthcare decisions they had us create for them an updated Revocable Living Trust as well as a new protective trust for their home and long term savings. Having a solid asset protection plan allowed them to decide to avoid paying over $15,000 every year to expand their long term care coverage from $100 to $250 a day, which was short of the $400 a day, cost at the time. They were pleased that this estate plan would protect their home, spouse, and life savings!

Over a decade later they remain clients and members of The Lifetime Protection Program as we help them strategically plan how their trusts and other life and death documents should function to preserve their capital.

As members of the Lifetime Protection Program, this retired couple enjoy many benefits. First, we helped them implement the proper healthcare documents for their children and grandchildren, over the age of 18, to ensure that in the case of an emergency; medical professionals would be able to disclose information to family members. This is a little known secret that you do not want to find out the hard way. [Please see our upcoming workshop schedule to discover more]

With healthcare documents in place, we were able to focus our attention on asset preservation and protection. As with most people that we help they were interested in ways to provide for the surviving spouse and ultimately, maximize the inheritances of their family members. Putting the deed to their home into their protective trust ensured that when their children inherited the property they would receive the step-up in basis as well as protecting the home against nursing home costs down the road. This alone will save their children from paying any long term capital gains if they sell the home at market value. Various gifting strategies, educational savings plans including a 529 account, were additional steps taken to reduce their overall estate tax levied by the Commonwealth of Massachusetts. An important step taken was to update their Durable Power of Attorney forms to provide maximum security in the event that either one of them lost capacity during their lifetime, and there were assets that were NOT included in their trusts. To discover more about trusts, life and death planning, as well our unique process and services visit and sign-up for a free discovery session. You and your family will be glad you did for generations to come. This planning could save you and your family countless nightmares, heartache, and a significant amount of money. Click here to attend an upcoming workshop today or call 1-800-964-4295 to register.

Tags: surviving spouse, charitable, donations, transferring, trust, irrevocable trust, Wills, Inheritance, step up basis, care costs, grandchildren

Step Up Basis Part 2

Posted by Dennis Sullivan & Associates on Tue, Mar 10, 2015

Losing the Step Up Basis Could be a Step Back On Your Estate Planning | Massachusetts Estate Planning Attorney

Last week we were discussing potential changes to the tax laws proposed by President Obama that would eliminate the step up in basis.  Obama claims the target is wealthy Americans but the change could have a much bigger impact on average middle class citizens.

     That’s because with the federal estate tax exemption currently at $5.43 million, only estates larger than that number must pay federal estate tax.  While Massachusetts estate taxes kick in on estates greater than $1,000,000, removing the step up in basis still means that many heirs would have to pay additional taxes on the assets they will inherit.

     Here is a common scenario:  Mary passes away and leaves her assets to her children.  Those assets include Exxon stock she and Frank bought many years ago and it is now worth $500,000.  The total estate is worth $1,000,000, including her home which Mary and her husband Frank purchased for $30,000, which is now worth $500,000.

     Under current tax laws, the children get a step up in basis on both the inherited stock and home.  Presuming they sell the home immediately after Mary’s passing, there would be no capital gains tax owed on the home.  The new basis would be the sale price.  The stock would also get a step up in basis.  The estate would owe approximately $25,000 in Massachusetts estate tax but no federal estate tax.

     If the step up is eliminated, the estate would still owe the same Massachusetts estate tax but now there would be an additional capital gains tax.  Obama’s proposal does suggest that some amount of capital gain be excluded from tax but let’s assume in my example there is no exemption.  Let’s also assume that the capital gains tax rate is 25%.  In that case, the tax on the home gain would increase to $95,000, almost four times what it is now.

     The tax on the stock would be more complicated to calculate.  We would need to figure out what Mary and Frank bought the stock for in order to determine the original basis. If Mary and Frank didn’t keep good records of their, it may be very difficult for their children to get them since they didn’t buy the stock themselves. The problems will only increase as well if there were stock splits or if the stock was bought in increments over time and different portions have a different basis.

     In any case, if the stock was held for many years then, it is safe to assume there would be substantial capital gains and the tax could easily exceed $100,000.  Add that to the tax on the sale of the home and you can see that a small estate of $1,000,000 could have additional tax of $200,000 or more, on top of the estate tax.

President Obama claims that he wants “wealthy Americans to pay their fair share”, but he doesn’t tell us that in the process everyone else will be paying more than their own fair share. Sure, the wealthy would be subject to this additional tax as well, but Obama’s plan clearly misses the mark.

Click here for more information on  Estate Planning and Asset Protection

At the Estate Planning & Asset Protection Law Center, we provide a unique education and counseling process which includes our unique 19 Point Trust, Estate and Asset Protection Review to help people and their families learn how to protect their home, spouse, life-savings, and legacy for their loved ones, click here for more information. We provide clients with a unique approach so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future.

We encourage you to attend one of our free educational workshops, call 800-964-4295 and register to learn more about what you can do to enhance the security of your spouse, home, life savings and legacy.


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Tags: estate tax, estate tax savings, taxes, Tax Savings, Inheritance, 2015, heir, stock, step up basis

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