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The best and worst assets to keep in a Florida estate plan

Good estate planning includes knowing which assets are worth holding in the estate and which might best be sold prior to passing on. In many cases, the decisions to hold onto or sell certain assets are based on tax incentives. Generally, it is a good idea to keep assets that have appreciated in value, such as stock or collectibles. However, it is a better idea to sell stocks or other assets that have depreciated.

Roth IRAs are worth keeping because once income taxes have already been paid on the money, meaning that future payouts will not be subjected to income taxes. However, in a taxable IRA, the tax is deferred on the money until it is withdrawn. Depending on an individual's tax bracket or the tax bracket of their heirs, the tax bill could cost tens of thousands of dollars. This means that, if necessary, a taxable IRA should be sold before a Roth IRA.

In addition, when considering whether to keep a stock in an estate until death, remember that heirs get a step up in basis. This means that their tax basis for that asset is equal to the value of item when it comes into their possession. This may be beneficial if the asset appreciated but may be detrimental if the asset depreciated.

The first step in the estate planning process may be to consult an attorney. An attorney could help determine which assets are worth keeping and which are worth selling if a benefactor needs to increase liquidity. This may enable an individual to pass on more of his or her wealth without future generations incurring a steep tax bill.


Source: Forbes, "Estate Planning: A Ranking of Good Assets and Bad Assets", William Baldwin, August 25, 2014

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