Plan to Leave Highly Appreciated Assets to Your Heirs

By: Joe Morgan

Sep 23, 2021 | Long-Term PortfolioLong-Term PerspectiveStock Portfolio

Today we are talking about legacy gifting.

You may think you are too young to think about this, but I think you’re never too young to begin structuring your investments for the right long-term outcome.

There are a lot of wrinkles in the tax code, and this is a doozy. Are you ready?!

Passing on Your Assets

When you die and your assets pass on to someone else, the capital gain tax gets erased for tax purposes. Not always, but in most cases and this is a terrific planning opportunity.

Where we see this most is in passing the family home to the kids, but this rule also applies to stock portfolios or almost any asset outside of your retirement accounts. If you have an investment strategy that you expect to be stable over your life, you might be reasonably sure that a lot of what’s left will pass tax free to your heirs.

Here’s How This Works

Let’s say you believe, as I do, that a passive low-cost investment portfolio is best. Further, let’s say you use funds that have been around a long time and are expected to be around a long time and that you won’t be doing much shifting of the portfolio.

Well, it’s easy to see that you might end up with a portfolio that has 30 or 40 years of capital gains in it when you pass away. Those gains may not be taxed at all as they pass to your heirs.

This is another one of those FREE money strategies, as it’s quite rare to be able to make regular market returns without ever paying tax on them. Of course, this is beneficial only to your heirs, but we love them don’t we and we want them to get the most they can from what we have, right?

Here’s this week’s Best Financial Life tip of the week: Plan to Leave Highly Appreciated Assets to Your Heirs.

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