Folks with dementia who have to be moved from one environment to another can sometimes experience stress and anxiety, termed “transfer trauma.”  The extent of the transfer trauma can vary among individuals.  For some, it can be brief, mild, or non-existent.  In others, the trauma is extensive and intense.  The more extreme cases usually involve someone with early stages of dementia who is moving from the long-time family home into a new environment. 

In estate planning, tax issues are pervasive, and mitigating their effect on a client’s estate is a major component of an estate planner’s job. In order to effectively spot issues and provide more comprehensive advice, estate planners need at least a basic understanding of tax concepts. Having knowledge of tax issues may be the difference between representing a client entirely “in house” and losing the client altogether by referring them to the tax attorney or CPA down the street.

Let’s begin with three important foundational tax concepts—income tax basis, transfer basis, and stepped-up basis. Understanding these terms is key to determining any income tax consequences on the sale or transfer of the asset.  

When Congress enacted tax reform in 2017, the new tax law permanently lowered the tax rate for corporations from 35% to 21%. To make sure that other business owners weren’t left behind, Congress provided a new deduction—Section 199A—for sole proprietors and owners of pass-through businesses. Section 199A offers eligible business owners a lower effective tax rate  by allowing for a deduction of up to 20% on qualified business income (QBI) for tax years 2018 - 2025. Due to a lack of initial guidance, there has been much difficulty and speculation regarding how this deduction works.