A Colorado Springs estate planning attorney at Buckingham & McGuire can assist clients with the drafting of wills and trusts in addition to overall estate planning techniques and questions.

Burden of Proof When Stepping up Basis of Jointly Owned Property

Under Section 2040(a) of the Internal Revenue Code, all jointly owned property must be included within a decedent’s estate, except for any portion that can be shown to have originally belonged to the surviving joint tenant, and that was never received or acquired by the surviving joint tenant from the decedent for less than full and adequate consideration.  Section 1014 of the Internal Revenue Code will generally give a surviving joint tenant a step up in basis as to the portion of the jointly held property that was included in the decedent’s estate.  This inclusion of the jointly held property in the decedent’s estate may or may not create any estate tax due, which would or may depend upon the use of the decedent’s unified credit or use of the marital deduction depending upon who else was a joint tenant.  Regardless, the inclusion of the property in the joint tenant’s estate will allow for the step up in basis.  This step up in basis could lead to taxpayers arguing that a larger portion of the jointly held property was included within the deceased joint tenant’s estate.  A taxpayer may be able to accomplish this by failing to show that they had contributed to the property.  Thus, what happens if the surviving joint tenant or tenants fail to or makes no attempt to establish their contribution in regard to the acquisition of the jointly held property?  Can the surviving joint tenant or tenants receive a full step up in basis to the fair market value of the property as of the date of death?  Who has the burden to prove a step up in basis should be allowed and the amount of the step up in basis?

One United States Tax Court case touched on some of the issues or questions above.  In Madden v. Commissioner, 52 T.C 845 (1969) the consideration furnished test was applied when the taxpayer included one half of jointly held stock in his wife’s estate tax return.  Such inclusion was made even though the deceased wife had not paid any consideration for the stock that was included within her estate tax return.  When the taxpayer sold the stock, a stepped up basis was used in computing the gain on the sale of the stock.  The basis was challenged by the IRS and the taxpayer unsuccessfully argued that his wife’s estate had failed to prove the burden that the consideration was not paid by the wife, and thus one half of the stock should receive a step up in basis under IRC Section 1014.  As stated above, this argument was unsuccessful as the court held the taxpayer had the burden to prove, and failed to prove that the jointly held property was required to be included in the decedent’s estate.  See IRC Section 1014(b)(9).  The reasoning of the court was that a taxpayer should not receive a tax advantage by deciding whether or not to include jointly owned property within an estate.  Thus, the “requirement” issue.

Under the current law, the consideration furnished rule will likely not apply to most cases involving property that is jointly owned by spouses, and one half of the property will be included within the estate of the first spouse to pass.  However, the consideration furnished test is likely to apply to non-spousal joint tenancies  and thus Madden can be of relevance.

You can contact The McGuire Law Firm to speak with a Denver estate planning attorney and tax attorney through a free consultation.

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Basis in Property Received Via Right of Survivorship

What is the basis in property that you receive via right of survivorship?  This is an important question for tax and estate planning purposes.  For tax purposes, your basis will impact your gain upon the sale or exchange of the property.  For estate planning purposes, you may hold property differently or gift certain property differently depending upon whether such property will receive a step up in basis or a carryover in basis.  The article below has been prepared by a tax attorney at The McGuire Law Firm to provide additional information regarding this issue.

Prior to revision the Internal Revenue Code only allowed  a step up in basis to the fair market value of the property at the date of death if the property passed from decedent by a bequest, inheritance or devise.  Thus, property held jointly did not receive a step up in basis because the property was viewed to have been acquired via a lifetime transfer, not an inheritance, bequest or devise.  When the Internal Revenue Code was later amended, Congress must have considered why a step up in basis for jointly held property would not be allowed when the property was included in the gross estate of the decedent for estate tax purposes.  Therefore, the code was changed to allow a step up in basis for property passing to the survivor of a joint interest.  The basis of the property could be stepped up or increased to the fair market value as of the date of death, or on the alternative valuation date if an alternative valuation date was elected.  It is important to note that joint property treated as income in respect of decedent under Section 691 of the Internal Revenue Code, is an exception to the current rule and thus does not receive the step up in basis.

What happens if only a portion of the joint property is included within the estate of the first joint tenant to pass away?  The survivor’s basis may be determined in part by the rules of Section 1014, potentially receiving a step up in basis and in part by reference to the basis of the survivor before the deceased joint tenant’s death.  This can be troublesome for the survivor, if the survivor received the property through titling (for example as tenants by the entirety) because the transfer can predate certain code sections and the transfer may not be treated as a gift.  Thus, could one tenant’s basis be zero?

Given the benefit of a step up in basis, individuals need to plan carefully when orchestrating their overall estate plan.  Under certain circumstances, it may be better for an individual to inherit property as opposed to a life time gift.  Of course, each individual’s circumstances are different and should be discussed with their tax attorney and/or estate planning attorney.

You can contact The McGuire Law Firm to discuss your estate and gifting matters with a Denver estate planning attorney, and discuss the tax implications of certain gifts with a tax attorney.

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Does a Revocable Living Trust Provide Asset Protection?

Does a revocable living trust provide asset protection?  In general, no a revocable living trust would not provide asset protection.  If the trust is revocable, and thus the grantor can revoke the trust and reach the assets as they wish, then the grantor could certainly do so for the benefit of their creditors.  The video below has been provided to discuss this matter and provide additional information.  Please remember that each set of circumstances is different, and you should discuss your issues specifically with your estate planning attorney.

You can contact The McGuire Law Firm to schedule a free consultation with an estate planning attorney in Denver, Colorado or Golden, Colorado.

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Who Are The Parties in a Will

Most people know what a will and last testament is and that a will is used to state your wishes regarding the disposition of your property.  However, many estate planning attorneys are still asked questions such as:  Who can be in my will?  What are the parties in a will?  What roles need to be identified and accounted for in my will?

All of the above questions are very important when considering your will and last testament and your estate plan as a whole.  The video below has been prepared to provide additional information related to the parties who may play a role in your will.

You can contact The McGuire Law Firm to discuss your estate planning questions and needs with a Denver estate planning attorney.

Denver Estate Planning AttorneyContact The McGuire Law Firm to schedule your free consultation with an estate planning attorney in Denver, Colorado or Golden, Colorado.

What is a Testamentary Trust?

What is a testamentary trust?  This may be a common question asked of an estate planning attorney, and a testamentary trust may be a common type of trust used by an estate planning attorney when working on a client’s over estate plan.  In short, a testamentary trust is a trust that arises or is created at the death of a testator or testatrix via their will.  Sometimes a testamentary trust may even be referred to as a will trust.

An individual can have multiple testamentary trusts created through their will depending upon their overall estate plan and estate planning goals.  Many parents with minor children will have a minor’s trust within their will, which in certain respects could be a testamentary trust.

If you have questions regarding your will, a trust document or your estate plan, you can contact The McGuire Law Firm to discuss these issues with a Denver estate planning attorney.   The video below has been prepared to provide more information regarding a testamentary trust.

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What is a Step Up in Basis?

Generally if you receive property through an inheritance and the value of the property was claimed in the decedent’s estate you receive a step up in basis?  So what does this mean?  What is a step up in basis?  Generally, a step up in basis means that you take the property with a basis at the fair market value as of the date of death as opposed to a carryover basis.  This can be beneficial because if or when you sell the asset or property, with a higher basis you should have less of a gain, and thus less tax.  A step up in basis is different than a carry over basis whereby you take the property with  basis that was the adjusted basis in the hands of the donor prior to the gift being made.  Certain assets, such as IRD assets (income in respect of decedent) may not get a step up in basis.

Please remember that the information within this article and video is for informational purposes.  You should always consult your tax attorney or estate planning attorney regarding matters relating to gifting property and transferring property at death, and the tax and estate implications.  You can speak with a Denver tax attorney and estate planning attorney by contacting The McGuire Law Firm.

Denver Estate Planning Attorney Denver Tax AttorneyContact The McGuire Law Firm to schedule your free consultation with a Denver estate planning attorney and tax attorney.

Denver Estate Planning Attorney Free Consultation

You can contact The McGuire Law Firm to schedule a free consultation with a Denver estate planning attorney.  We feel it is very important to provide a free consultation to first and foremost meet a potential client, and then of course, discuss your estate planning needs, questions and concerns.  The most important questions do not revolve around how much money you have, but rather, what do you want to do?  How do you want to leave assets and property to loved ones?  What do you want your legacy to be.  It does not matter if you do not have a high net wealth, what matters is that you have a plan to properly transfer your assets as you see fit.

You can contact The McGuire Law Firm to schedule a meeting with an estate planning attorney in Denver, Colorado or Golden, Colorado.  The video below has been prepared by an attorney at The McGuire Law Firm to provide additional information regarding our free consultation.

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Has a Gift Been Made?

When property is gifted it is important to look at the facts and circumstances surrounding the gift, and analyze whether or not a gift has actually been made for estate tax purposes.  If a donor maintains a certain amount of control over the property than a gift may not have been made for estate tax purposes, and the property could be included within the donor’s estate for federal estate tax purposes.  This may not have been the overall goal for the donor, and the inclusion of the asset within their estate could create a larger amount of estate taxes.

You can discuss your estate planning matters with a Denver estate planning attorney by contacting The McGuire Law Firm.  The McGuire Law Firm provides a free consultation with an estate planning attorney to discuss the questions you have regarding your estate planning matters.

What is a Special Bequest?

What is a specific bequest?  This may be a common question that is asked of an estate planning attorney, and specific bequests are common and important when assisting individuals with their estate plan.  A specific bequest is stated within a will and last testament and is when a testator or testatrix bequeaths a specific item to a specific person.  For example, Jeff may have an antique rifle and he wishes to leave to his son Jake.  Thus, in Jeff’s will and last testament Jeff may make a specific bequest to Jake, and the specific request may state something such as “I specifically bequeath my antique Winchester rifle to my son, Jake.”

Thus a specific bequest allows a testator or testatrix to identify specific items and assets and leave those assets to a specific individual.  As always, you should discuss your estate planning questions and issues with your estate planning attorney.  If you have questions regarding your estate plan, you can contact an estate planning attorney at The McGuire Law Firm.  The McGuire Law Firm provides a free consultation with an estate planning attorney so you can discuss your questions, issues and concerns regarding your estate documents and most importantly your wishes and the legacy you wish to leave.

Contact The McGuire Law Firm to schedule a free consultation with a Denver estate planning attorney.

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What is a Carryover Basis?

What is a carryover basis?  When will you receive property subject to a carryover basis?  The video below has been prepared to provide additional information related to carryover basis.  You may ask, why do I care about taking property subject to a carryover basis as opposed to a step up in basis?  The simple answer would be, because the basis will dictate your gain when you sell, transfer or dispose of the asset.  Thus, because your basis can change depending upon whether you take property subject to a carryover basis or a stepped up basis, these issues are important when consider gain and the tax implications of such a sale or exchange.

You can contact The McGuire Law Firm to discuss your tax, gift and estate related issues with a tax lawyer in Denver, Colorado.  The McGuire Law Firm provides a free consultation with a tax attorney and/or estate planning attorney.

Denver Estate Planning AttorneyContact The McGuire Law Firm to schedule your free consultation with a Denver estate planning attorney or tax attorney!