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Good Estate Planning for Poor Health

As soon as spouses begin accumulating assets, they should each have a will drafted.  The serious illness of either spouse is an indication that it’s time to revisit those plans.  What are some steps to consider?

Review asset ownership — In most states, assets held in joint tenancy pass automatically to the survivor and get a stepped-up basis in only one half.  Shifting ownership may enable a basis increase in the full value, thereby saving capital gains tax in the future.

Get documents in order — Make sure both spouses’ wills are up to date and that any trusts reflect the couple’s current wishes to take advantage of tax-saving opportunities.  If the ill spouse has a qualified retirement plan, review the beneficiary designations and expected tax results.  Prior spousal consent is required if anyone other than the surviving spouse is named a beneficiary (other than for IRAs).

Capital gains and losses — Ask a tax adviser to suggest strategies for investments that are owned jointly or in the name of the spouse in poor health.  Consider selling loss assets, to preserve capital loss deductions, or make a lifetime gift of the loss assets to the spouse likely to survive.

Plan your charitable gifts — Many people who make charitable gifts during their lifetimes want to remember favorite organizations in a will.  With few people subject to the estate tax (only estates in excess of $5.49 million in 2017), a better option might be to allow the surviving spouse to make a memorial gift, which will qualify for an income tax charitable deduction.



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