Inheritance & Power of AppointmentBoth John and Mary's parents are deceased, and they do not expect to receive an inheritance from any source.
Business Interest
As CFO of Evergreen Technology, John enjoyed a financially rewarding career - as an employee, not an owner. The $3.5 million in company stock John owns is a significant part of his net worth, but he is still a very minor shareholder of the company.
Comments
The Evergreen stock is ideal for transfer at death because, under present tax law, the value of the stock receives a step-up in basis at John's death, avoiding capital gains taxation. This rule changes in 2010 (during the one-year repeal of the estate tax) when a modified carryover basis takes over. Under the modified carryover regime, the value of property exceeding $1.3 million does not receive a step-up in basis but instead is subject to capital gains treatment. Either way, the stock is valued as part of John's estate at his death.
Donating the stock to charity is one way to reduce the value of the stock from John's estate. Part of the Stevens' bequest plans is to donate $4.5 million between six charitable institutions, but the will is silent of where those assets will come from. The Evergreen stock, with a current value exceeding $3 million, could well serve this purpose.
Note: Donating the stock to a charitable lead trust
or a charitable remainder trust could provide
immediate income tax benefits while providing
financial security to John and Mary. What's
more, it would reduce John's taxable estate.
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