Things new clients say that make me nervous:
- “Well, we put the house in the trust ten years ago.”
- “We gifted the stock to the kids already.”
- “We wanted to stay under the estate tax limit.”
The intent is usually good—protecting family, reducing taxes, simplifying the estate. It can become problematic though, particularly in the areas of tax planning and how we think about the step-up in basis.
This comes up all the time with long-held assets—stock purchased decades ago, real estate that’s appreciated 10x over time. A lot of families don’t realize that you only get a step-up in basis if the asset is owned at death.
Let’s say your parents bought a home in the 1970s for $50,000. Now it’s worth $1 million. If they still own it when they pass, the cost basis steps up to fair market value. That means no capital gains if it’s sold soon after.
If they transfer it into a trust—or give it away entirely—before passing, that step-up can be lost. You inherit their original basis instead of the full value. And now, instead of a clean inheritance, you’re holding a massive embedded gain.
Estate planning often involves trade-offs like this. Give up ownership, and you might reduce estate tax, but you could also trigger unnecessary capital gains for your heirs. There’s no one-size-fits-all answer, but we need to run the analysis.
Lately, the conversation has shifted. With federal estate tax thresholds still relatively high, more families are shifting their focus from estate tax minimization to income tax efficiency, particularly in capital gains planning. In some states, like Massachusetts, where a state-level estate tax still exists, the decisions get even more nuanced.
Then there’s the administrative chaos with assets scattered across banks, accounts nobody tracks, and spouses left sorting through a mess of CDs in six different institutions. We’ve seen it all. That’s why we spend time with our clients going line by line through titling, ownership, trusts, and what actually happens when someone passes. All of this is to avoid smart, well-intentioned, financially capable people losing real money when coordination gets missed.
In many of these technical areas, you need more than common sense. You need a fully integrated team to help you understand what you own and how it all works together. You need fully integrated financial planning.
