Revising Estate Planning Strategies

When the rules of the game change, your tactics should follow in response to the new landscape. While estate tax exemptions have ridden an uncertain roller coaster in recent years, the rules appear to be stabilizing after the passing of the Tax Cuts and Jobs Act, prompting many to reconsider estate planning strategies. In 2017, Congress raised the estate and gift tax exemption to $11.2 million, doubling the $5.6 million that previously existed. In 2022, the estate and gift tax exemption is $12.06 million. This exemption increase means that potentially hundreds of additional American households may be able to pass on their assets free of estate taxes. It also means that individuals may want to revisit their current approach to estate management. Changes in Gift Strategies One of the objectives of gifting assets is to manage taxation on an estate’s future growth. However, this strategy comes at the cost of losing the tax advantage of the step-up in cost basis attached to inherited assets. Since more assets are excluded from the estate tax, the need to gift assets for tax purposes may no longer be necessary. For many estates, there may now be no reason to gift assets during a

September 1, 2022 No Comments

Stocks versus real estate

A lot of people contact us asking about buying real estate. “It’s a hard asset and they’re not making any more of it,” they say. When we’re asked this question, we try to explain the advantages of owning stocks instead of or in addition to real estate. One way we do this is explaining how our portfolio managers pick stocks, and then comparing the costs of stocks to real estate. Picking stocks isn’t that different from looking for a good piece of real estate. First, you look at the quality (who built it, where it is, etc.). Then you figure out its worth, or valuation. Next up, you figure out your best- and worst-case scenarios for rent and taxes. (For stocks, you look at things called price-to-earnings ratios and cash flow return on investment). When the real estate is priced below your worst-case scenario, you buy it. That’s how it works with most stocks, too. There are, however, a couple of differences between real estate and publicly traded stocks, namely liquidity and low transaction costs. This ought to make real estate investors sit up and take notice. Let’s look at liquidity first. If you need cash, selling real estate may

April 8, 2019 No Comments

Stocks vs. real estate

A lot of folks contact us asking about buying real estate. “They’re not making any more of it. And it’s a hard asset,” they say. When we’re asked this question, we try to explain the advantages of owning stocks instead of or in addition to real estate. One way we do this is explaining how our portfolio managers pick stocks, and then comparing the costs of stocks to real estate. Picking stocks isn’t that different from looking for a good piece of real estate. First, you look at the quality (who built it, where it is, etc.). Then you figure out its worth, or valuation. Next up, you figure out your best- and worst-case scenarios for rent and taxes. (For stocks, you look at things called price-to-earnings ratios and cash flow return on investment). When the real estate is priced below your worst-case scenario, you buy it. That’s how it works with most stocks, too. There are, however, a couple of differences between real estate and publicly traded stocks, namely liquidity and low transaction costs. This ought to make real estate investors sit up and take notice. Let’s look at liquidity first. If you need cash, selling real estate may take

May 4, 2018 No Comments