A new President settling in at 1600 Pennsylvania Avenue usually signals that change is coming.
While we don’t yet know for certain all the modifications the Biden administration will usher in, two strong possibilities are that it will lower the estate tax exemption and repeal the stepped-up basis rule in the tax code.
What does that mean for estate planning?
We caught up with local elder law attorney Margaret T. Karl for some guidance. Her practice deals with wills, trusts, powers of attorney and legal documentation, as she customizes each estate plan to a person’s unique situation.
“It’s always smart to have a relationship in place with a lawyer who is familiar with your estate and can anticipate the effect tax code changes might have on you,” she says. “For instance, even though the estate tax exemption is at $6 million right now and doesn’t affect any of my clients, nearly 20 years ago when I started practicing law it was down to $1 million, which would impact more people.”
She explains that the elimination of the stepped-up basis rule would have potential consequences for the long-term capital gains tax upon the sale of a home.
“Basically, the stepped-up basis readjusts the value of a property to the market value at the date of the benefactor’s death, not the date it was purchased,” she explains.
In other words, without the stepped-up basis rule in place, some people who inherit property that has risen in value could end up paying more in taxes.
“If someone inherits a house from their parents that they had lived in since the 1960s, that had significantly increased in value, the ramifications are they could go from paying zero capital gains taxes to paying thousands of additional dollars in taxes,” she says.
Luckily there are estate planning tools in place to get around the elimination of the stepped-up basis rule, for instance setting up a trust to protect the assets of the estate.
This time of year, Margie says she’s especially busy with new clients who have taken their documentation out to review for tax preparation.
“Tax law is quite complicated, and I always keep my finger on the pulse of changes,” she says. “Even a slight change in the legal wording could have serious implications for people. Staying ahead of that allows us to make the best choices when it comes to estate planning.”
New Website, Blogs for News You Can Use
Margie has just revamped her website and is adding blogs that cover important issues people are searching for.
“Before Covid hit, I did public speaking engagements around the Cleveland area,” she says. “Many of those topics will be incorporated into my blogs, such as estate planning issues, Medicaid planning, real estate deeds, and wills and trusts.”
This month, as we slowly recover from the pandemic, she’s happy to meet with more of her clientele face to face, but is still providing Zoom calls for those who are not comfortable with contact.
“We have regular office hours and just ask that people please call before coming in so we can keep the number of people in our waiting room to a minimum,” she says.
A hallmark of Margie’s long and successful career is compassion.
“I realize that planning for your final wishes can be emotional and stressful,” she says. “Some people might be dealing with these issues for the first time. I remain professional and make sure they understand the documents we work with.”
The office of Margaret T. Karl, attorney at law, is located at 25800 North Depot Street, Suite 102, in Olmsted Falls. Office hours are Monday-Friday, 9 a.m.-5 p.m. Margie makes appointments on evenings and weekends if necessary and also makes house calls. For more information, call 440-782-5051or visit OlmstedOhioLaw.com.