It is not always bad to pay taxes. In fact, it usually means you’ve made money. However, strategic planning is essential to minimize tax burdens and maximize wealth transfer to the next generation.
Part of legacy planning is ensuring that as much of your hard-earned money as possible is passed on to the next generation without losing a significant portion to taxes. This requires careful consideration and planning.
Aaron and his brother face a difficult situation. Their mother, now in her eighties, has rising expenses that her income and insurance can no longer cover. Although her net worth exceeds $5 million, it is largely tied up in two low-dividend-paying stocks she inherited many years ago.
The major challenge is the capital gains tax. If their mother sells the stock to cover her expenses, the capital gain would be significant, as her cost basis is under $300,000. This makes selling the stock a costly option.
Originally, Aaron and his brother planned to hold the stock until their mother passed away, intending to sell it at a stepped-up cost basis, avoiding capital gains tax. Now, they are conflicted—feeling guilty about prioritizing their inheritance while frustrated by the inability to sell the stock and diversify into higher income-producing investments that would better cover their mother’s expenses without eroding their future inheritance.
Here are some of the ways we guide clients in making critical decisions and taking control of your finances:
Transferring Wealth to the Next Generation involves carefully planning and managing assets to ensure a smooth transition, preserving family wealth and achieving long-term financial goals.
The Parent Trap highlights the financial and emotional challenges parents face when trying to support their children, often risking their own financial stability in the process.
