Gabb Morrison LLP

I just learned that 24-hour at home sitter care from a local provider (meaning not California rates!) is now $285,000 a year! Not surprisingly, those rates have gone up as much as gas and groceries! Are you ready? If you are still healthy, maybe now is the time to look into some options to help fund your care because from the looks of this article, it's NOT going to be your kids!
https://www.msn.com/en-us/lifestyle/other/millennials-say-they-ll-refuse-to-care-for-aging-boomer-parents-but-they-ll-be-forced-to-as-their-inheritance-shrinks-to-40-cents-on-the-dollar/ar-AA297jom?ocid=entnewsntp&pc=U531&cvid=6a6ccbfd0e3d4954a484f7098f3f1ecf&ei=18&fbclid=IwY2xjawTZrqZleHRuA2FlbQIxMQBzcnRjBmFwcF9pZBAyMjIwMzkxNzg4MjAwODkyAAEeLxVBWlnkowrETM8UCzx_unfAelhG4eoctrx-MNCVaDXNX5juLgIZ9H070kA_aem_fHjcbdEjDyq_6OB_uXwLfA

Millennials say they’ll refuse to care for aging boomer parents but they’ll be forced to as their inheritance shrinks to 40 cents on the dollar The oldest boomers are starting to turn 80, but the great wealth transfer isn’t materializing as promised.

One of the most-asked questions we get: "Should I add my child's name to my accounts?" After reading this, you decide. Full text of article below:

The Keys to the Castle

“Should I add my child’s name to my account(s)”? The answer is “it depends.” Giving the kids the keys to the castle while you are still alive and competent is a tough decision. This article gives you the pros and cons, so that you can make an informed decision.
It makes sense why you may want to do this: to allow your child instantaneous access to your BANK account(s) without having to go through cumbersome legal channels upon your death or disability. Your child may easily access the proceeds while you are alive, but also upon your death as the account would not be “frozen” as long as there is another “co-owner”.

Sounds great right? Well…maybe. Any co-owner may withdraw all of the funds at any time, without the permission of the other co-owner(s). While most of you will say that you trust your child implicitly and the foregoing is not a concern, can you guarantee that your child will not:

1) Predecease you, and perhaps their heirs would try to claim these assets through your deceased child’s estate?
2) File for divorce, and their spouse tries to claim these as marital assets?
3) File for bankruptcy?
4) Get sued (for any number of reasons)?
5) Become ill and need to qualify for Medicaid (or any other asset-based programs, like school loans/grants, etc.) and now these assets may disqualify them?

Do you still think it’s a good idea? If the above causes you concern, and it should, think about these options:

 Maybe add your child(ren) to only one account that doesn’t keep a very large balance, as you can always transfer funds from another account if needed.

 Create a trust (either revocable or irrevocable) to own your assets and name your child(ren) as co-trustees (who may act independently) instead of co-owners, with none of the above liabilities, but all the access.

Also, be sure you have a comprehensive and up-to-date general financial power of attorney (POA) in place. Many of the brokerage firms now have their very own POA forms which I highly recommend you fill out, in addition to your general POA (because it has already been pre-approved by their legal department). If the time comes when you are unable to handle your affairs, your child has already been named as Agent under your POA, and can access these assets. In this case, just like being a Trustee, your assets are not at risk from your child’s estate, spouse, or creditors.

But remember, a POA ends upon your death, so go to your bank and add your child(ren) as “Payable on Death” (POD) beneficiaries to your accounts. (Most banks and credit unions offer this.) Now, upon your death, your children only need to provide the bank with your death certificate in order to claim the funds in this account.
Caveat: “co-ownership” with your child(ren) should almost never apply to brokerage accounts because that account becomes frozen when any owner dies, then the account must go through their probate/succession. What if your child’s Last Will leaves all their assets to their spouse? You legally just lost half of your account to your child’s spouse! You also lose the benefit of the full step-up in basis upon your death because you only owned half (or less) of that account.

The one asset that should be co-owned with a child (if not owned by your trust) is your safe deposit box. This asset needs to be accessed quickly post-death, especially if this is where your Last Will and Testament, life insurance policies, burial plans and cemetery deeds are stored. Unfortunately, we have had to open quite a few successions that were not necessary except for a safe deposit box where a child was merely a signatory on the box and not a co-owner. Please be sure and verify with your bank now that your child will have post-death access.

Now it’s up to you to decide if it’s time to give your kids a set of keys to the castle!

CREMATION NATION! Here is an article I wrote 3 years ago, truly everything is the same (except prices went up). If the funeral homes' prices listed on their websites (as of today) are accurate, for a direct cremation (using the funeral home's provided box) you have two Covington funeral homes whose prices are drastically different: Bagnell (who we used for my own mom) is $1,495 and Fielding is $3,495. I think this is just a glaring example of doing your homework and shopping around.

It seems like these days many folks who are doing direct cremations are having their "Celebrations of Life" elsewhere, as opposed to inside traditional funeral homes. If you followed me and my "Jackie's Journey" posts, you know that my mother's "Celebration of Life" was at the Tammany Yacht Club in Slidell. It was a fabulous party with champagne and caviar, exactly like my Queen requested. When people live to a ripe old age, WHY NOT? It is indeed a Celebration of a Life Well-Lived and Well-Loved.

While this surely isn't a good trend for funeral homes (just like the HUGE rise in cremations), I think what it may wind up doing in time is increasing the cost of everything, especially direct cremations! Ahh...but that is for another article and another day.

Here is the actual text of the article for easier reading:

Cremation Nation by Ronda M Gabb

In 1979, only 5% of Americans chose to be cremated. That figure rose to over 56% in 2020, and it is projected that by 2035, almost 80% of us will choose cremation over either burial or medical donation. So yes, that definitely makes us a “Cremation Nation!”
There are many factors which attribute to this rise in popularity. Probably first and foremost, is economics. “Direct” cremations, meaning cremation only with no other services, are about one-quarter the cost of a traditional funeral. In our local area, I was surprised that the most inexpensive direct cremation was only $1,395 compared to the most expensive one being more than double that amount at $2,895. Check out PARTING.COM for local prices.

Another reason is demographics. Families move around now more than ever and are sometimes hesitant to “commit” to purchasing plots and crypts with a particular cemetery until permanent retirement roots are laid, and even then we see folks move again to be closer to kids and grandkids as they age. You have to admit, cremains are certainly easier to move than a casket!

The drastic changes in religious doctrines have also had an impact. In the past, many religions frowned upon cremation, where now most religions allow it. The first U.S. crematorium was opened in 1876 by Francis LeMoyne in Lancaster, Pennsylvania, and it was severely criticized by the Catholic church. But in 1963, Pope Paul VI lifted the ban on cremation, and by 1997 Catholics allowed the ashes to be present at the funeral Mass. However, the Catholic religion does not allow the scattering, separating, or co-mingling of the ashes; they must be kept intact and placed in a hallowed place (e.g. not on your mantel).

Burials at sea are interesting and even involve the government! For example, you must be more than three nautical miles from shore and you must report the burial to the EPA within 30 days after the burial. You’re also NOT supposed to dump Fido’s cremains in the sea with his owner (human remains only). For more information visit: epa.gov/ocean-dumping/burial-sea. Interestingly, while the Catholic religion does not allow the ashes to be scattered at sea, a burial at sea is allowed (along with a special prayer) as long as the container, made to keep the ashes intact, is dropped to the bottom of the sea.

I wonder if the religious aspect is why the South (which tends to be more religious) has the lowest cremation rates in the nation. In Mississippi only 27.9% are cremated, followed by 32.6% in Alabama, and 37.1% in Louisiana. The highest cremation states are Nevada at 80%, Oregon at 78.9% and Washington at 76.7%. The lowest is Utah because cremation is frowned upon in the Mormon religion.

Louisiana has some very strict laws regarding cremation. If you have made no prior legal arrangements, and you wish to be cremated, your spouse must agree to the cremation. If you have no spouse, then a majority of your adult children must agree. If you have no spouse or living children, then it goes down to your adult grandchildren, if none, then to your parents, then to your siblings. If there are none of the aforementioned, then your closest adult relatives would have to approve the cremation. So what happens if we can’t get a majority? Then off to Court we go, as we need a Judge’s Order. Who wants that expense and heartache at such a difficult time?

Specifying your desire to be cremated in a notarized Last Will and Testament can avoid these approvals. We always encourage our clients to openly and actively discuss their funeral arrangements with their family and loved ones. We spend a great deal of time with clients to assure that their final wishes will be honored, in light of so many clients wishing to be cremated.

If you don’t have a notarized Last Will, then you can execute a “Declaration of Burial Desires.” This is a legal document where you designate an “authorized agent” to carry out your wishes for cremation, burial, and funeral. You must keep your agent informed of your wishes, including interment or inurnment. To be compliant with our law, this Declaration must be notarized.

Now you know how to join the Cremation Nation!

While my favorite local meteorologist, Zack Fradella, watches this new possible Gulf disturbance, it's probably a good time to start honing our preparation skills for the 2026 Hurricane Season (which hopefully is not supposed to be as dire as the one I wrote about in this article from a few years ago).

The article is attached but below is the text for easier reading:

BE PREPARED…it’s not just for the Scouts!

If you have read some of my previous articles, I hope you took to heart that the person responsible for handling the household finances has already shared their tips, tricks, locations, logins and passwords, for keeping the bills current and the finances organized. While both of you are involved in this process, unfortunately it’s time to prepare for hurricane season by reviewing your important papers and deciding what is important to bring along in case of an emergency evacuation.

In anticipation of this upcoming dreaded high-activity hurricane season, it is a good time to be sure your insurance policies are all up-to-date. We have spent so much more time at home over the last few years that many of us have taken the opportunity to renovate or upgrade our homes and perhaps our furniture. This may warrant an increase in coverage for your home and/or contents and all that has to be done when there isn’t a storm already in the Gulf! Be sure the limits on your homeowners and flood insurance are sufficient if you must rebuild or replace the contents of your home or business. Remember, contents coverage exists under flood insurance policies, too, as many of us (including me) learned the hard way after Hurricane Katrina.

Another lesson learned from Katrina is that safe deposit boxes are not waterproof! Important papers, titles and valuables (like the 1,000,000 Iraqi Dinars I have had for 20+ years waiting for it to be worth $1-LOL!) that are kept in your safe deposit box (or even a safe at home) should be stored in waterproof Ziploc bags for extra protection. Now, I even keep my tax returns at home stored in big Ziploc 2-gallon bags (but I do live on the water).

In this day and age, much of the information you may need can be stored electronically. If you are bringing your laptop or iPad, you may have all you need. Or you can save this data (and photos) on a thumb-drive or a small external hard drive that is small and easy to carry with you. However, you may also wish to carry paper copies of your insurance declaration pages in case websites or internet are inaccessible for a while after a major catastrophe. Of course, we hope and pray that will not be the case, but we’ve seen it happen before, and this season’s projections are higher than ever so we may as well BE PREPARED!

As dismal as this sounds, when we evacuate, we have to admit the possibility of what we left behind may not be there when we return. Therefore, we should be evacuating with our cash, passports, valuables, heirlooms, people/pet cremains/urns, medications, etc. However, the “bad” people know that too, so be extra vigilant when leaving your car, or hotel room unattended, even when locked. Use your hotel safe if they have one, or just be sure someone is always in the room or keeping an eye on the car, yes, even at the rest areas. Unfortunately, someone’s tragedy is all-too-often someone else’s opportunity.

Here are some suggestions of what you may need in case of an emergency:

1. Insurance policies and your Agent’s emergency contact information;

2. Bank and other account information, and extra cash;

3. Health Care directives, like your Health Care Power of Attorney and Living Will that should include your emergency contacts (or your *DocuBank card if you have a membership);

4. Other important papers/documents (Last Will & Trusts, car titles, passports, birth certificates, Social Security cards, if these originals are stored at home), family heirlooms/art, photographs—this may include items of monetary value, and especially those of sentimental value.

*DocuBank is a service we have used for 25 years that houses members’ medical directives electronically, and allows access to these documents and information from anywhere in the world, 24 hours per day. Visit www.DocuBank.com

These days it’s easy to be consumed by the possibility of a catastrophic event. Anyone who knows me, knows that I am a planner. I like to know the people that I love are safe, and those things I have worked so hard for are protected. The best we can do is BE PREPARED, just like the Scouts would do!

Here is a good "No Tax on Tips" lesson...I have written on the 2025-2028 no FEDERAL tax on tips (up to $25,000) before and touched on this briefly. But, after my return from a fabulous 2-week vacation in Seattle, Alaska and Canada, I saw this occur at almost EVERY restaurant in those areas (regardless of the number in your party): MANDATORY 20% (or more!) Service Charges. Realize that this temporary tax break does NOT APPLY if your tips are coming from a MANDATORY charge from your restaurant (or any employer that may be charging this mandatory fee for your tip, no matter your occupation).

I can imagine this topic can have strong feelings on either side of the fence. Obviously, this guarantees at least SOME tip for the server/staff (because unfortunately, there are a lot of American people who are just cheap, but many Europeans literally just leave change as that is their custom because their servers are well-paid) BUT if it's labeled as a "service charge" (as all of these were) then it is sales-TAXED to the consumer (as the TIPS we write in on our bills are NOT) and it is paid directly to the employer and how much of it is really going through to the actual employees (which many servers were very adamant about telling you all about how it's NOT)? Anyway just FOOD for thought.... 🤣

Meanwhile, I have to say that I am just IN LOVE with COLD WATER raw oysters (at $4-$5 EACH-ouch)! These from the Pacific Northwest and Alaska were fabulous and last summer I had the best ones too from the Cape Cod area. Elliot's in Seattle (pictured here, but I did throw in an AI background) served them with an icy Mignonette sauce. DELISH!

Here is a pretty good article that sums it up nicely...
"YOU DON'T WANT TO BE THE RICHEST PERSON IN THE GRAVEYARD!"
and...
"IN THE END, IT'S NOT WHAT YOU HAD THAT MATTERS. IT'S WHAT YOU DID."-Bill Perkins

The 'Die With Zero' Rule of Retirement If spending makes you nervous, the 'Die With Zero' rule might be for you. Because you don’t want to be the richest person in the graveyard.

Last week's post on 1031 exchanges and the 121 exclusion elicited questions about the "step up" in basis. In the comments I have posted my 2022 Slidell Magazine article on this (and for the full text of the article just scroll down). The below text is now accurate regarding Louisiana's 2026 flat capital gains rate of 3%, whereby in the 2022 article, the max rate was 4.25%.

Step Right Up!
By Ronda M. Gabb

One of the most important concepts that an estate planning attorney needs to be familiar with is cost basis and step-up in basis for their clients, especially when handling successions. Giving wrong or incomplete advice to clients in this area can cause significant adverse tax consequences. Unfortunately, we often see this occur with inexperienced attorneys handling successions.

First let’s discuss what “basis” is. In short, it is the price you paid for an asset (like stock or real estate), or perhaps the value of a business that you started. If the asset was donated to you, your basis is whatever the donor’s basis was. Some assets can be tricky because many of us also “depreciate” the asset that we own, especially if it is a piece of rental property. That depreciation directly lowers your cost basis. Depending on how long someone has owned an asset their cost basis could even be ZERO. This is why these very low-basis properties are usually sold through a “1031 exchange” during the life of the owner to defer the capital gains/depreciation recapture until death and the step-up occurs.

While death is sad and final, we also have to look at what “good” can come of it. One of those things is what is called the “step-up in basis” and its impact can be huge for many people. Here is a common scenario. Our decedent, John Doe, died on July 1, 2024, owning a vacation home with a fair market value of $1,500,000. John Doe purchased the property thirty years ago for only $250,000. Had John sold this property during his lifetime, say on June 1, 2024, he would have had to pay significant capital gains taxes on his “profit” of $1,250,000. For 2024, the federal capital gains tax rate assessed on the profit from assets held long-term (more than one year) is either 0%, 15%, or 20%, depending on your taxable status. In this example, the tax rate would be the max of 20%. For assets held short-term (less than a year), it is your ordinary income tax rate. For Louisiana tax, since 2025, the state now charges a FLAT tax of 3%.

However, when John Doe died on July 1, 2024, his beneficiaries/heirs/legatees received the property now at the “stepped-up basis” of $1,500,000. If the property was sold on August 1, 2024, for $1,500,000, there would be absolutely ZERO capital gains (or Louisiana) taxes due! Additionally, if the property was the COMMUNITY property of John Doe and his spouse, Jane Doe, then the entirety of the property gets a step-up in basis, NOT just the community half of the deceased. So even if Jane sold the property during her lifetime, her “new” basis now is “reset” to the $1,500,000. This is only available in community property states and fairly often we see that the spouse’s ability to step-up their half is overlooked.

Now you see why it is critically important that succession attorneys make sure that their clients provide them with accurate valuations for properties and business interests so that their clients’ assets get the “new” and proper step-up in basis when these assets are later sold. If assets are “under-valued” then the full step-up in basis may be jeopardized.

LAW-niappe: If the property is your primary home, and it has been your primary residence for two of the last five years (the two years is actually cumulative), then even during your LIFTETIME the sale of the home may qualify for what is called the “Section 121 exclusion from capital gains” for the first $250,000 of profit ($500,000 for a married couple), and you do NOT have to purchase another primary home.

It's my favorite week of the year...spending Pensacola BEACH time with 45 members of my family! We are spread out over three houses this year but the large/main beachfront home that I am in sold this April for $5.5 million (yes, that's insane) and the previous owners paid $2.65 million in February 2019, so it MORE than doubled in 7 years! Obviously, much of the adult beach conversation has been about capital gains (and why didn't WE all chip in and buy this house back in 2019!) so I decided to re-post this great article I did back in 2022, but all information is still accurate. Enjoy!

Here is the text so it's easier to read:

Here’s Your 411 on 121 and 1031!

Real estate prices have never been higher, so we have been fielding lots of questions about the implications of selling property for a significant profit. While we are not accountants, nor CPAs, a good estate planning attorney must have a competent understanding of these issues to dispense the proper advice. This article is meant to be only a primer on these issues and we highly suggest you speak in more detail with your own tax professional.

Let’s start with what is called the “Section 121 Exclusion” (principal residence tax exclusion). This Internal Revenue Code (IRC) section allows you to exclude the first $250,000 ($500,000 if married and filing jointly) of capital gains from the sale of your PRIMARY home if you meet certain requirements. Many people don’t realize this “new” law has actually been around for 25 years now! (Before that, you either had to purchase a more expensive home or if you were over age 55 you had a one-time exclusion of the first $125,000 of capital gains.)

It's pretty simple, if you have owned and lived in the home as your PRIMARY residence for two of the last five years (the 2 yrs/730 days do not have to be consecutive) prior to the Act of Sale then the first $250,000 of capital gains is excluded ($500,000 for a married couple filing jointly). It is fine if the title is only in one spouse’s name, but BOTH spouses must have resided there for the 2 year period. Even if your spouse has predeceased you, you still have two years from your spouse’s date of death to utilize their “extra” $250,000 exclusion amount (as long as you have not remarried). If during any part of the last five years the home was used as a rental property or as a home office deduction, discuss this further with your tax professional as this will offset some of the exclusion amount.

I have many clients who literally do this every two years! They buy properties that need some TLC at a good price, fix them up and live in them for the two year period and then sell them for a hefty profit and their first $500,000 of capital gains is FREE. God Bless America!

But what if the property being sold isn’t your primary home? Now we look at what is called the “Section 1031 Exchange” (like-kind exchange). Basically, this neat aspect under the IRC allows you simply to “defer” paying capital gains until a later time, and maybe not ever if the property is held until death and gets a “step-up” in basis (read last month’s “Step Right Up” article for more on that).

The property must be used for business, trade or investment (so not your primary or second home, unless it’s rented out) so this is often used for rental property. You will want to use an experienced qualified 1031 intermediary company to handle the process. This is like doing a “swap” of properties, but usually for a property worth more (or the same). Let’s say I purchased a rental property for $150,000, and it has been depreciated down to $100,000, and I now have a buyer giving me $300,000. If I simply sold it now, I would be paying capital gains taxes on $200,000 of gain. If, however, I found another rental property for $300,000 (or more) I could buy the new property using a 1031 exchange. Although my “basis” remains at the $100,000 mark, I have managed to “defer” my capital gains taxes until I sell this new replacement property. If I die before I sell, then my spouse and/or my children will now inherit this property at the full fair market value as of the date of my death. They can now sell the property and pay NO capital gains at all.

Unfortunately, a 1031 exchange comes with “set in stone” deadlines. When I sell my property (and the 1031 intermediary holds my $300,000) I MUST clearly identify the new property that will replace it within 45 days of my sale (I am allowed to identify up to 3 properties that I may choose) and then I must close on the sale within 180 days of my initial sale.

I have many clients who have been deferring their capital gains for decades upon decades, and if the property was community property, when the first spouse dies, the surviving spouse can now sell it for full fair market value with ZERO capital gains. If you are married and have inherited (separate) property that is subject to a 1031 exchange, or for whatever reason has very low (maybe even zero) basis, you may want to discuss with your estate planning attorney and CPA the pros (and cons) of converting that property to community to be able to get a step-up in basis at the death of either spouse. Now that is some good estate planning! Use this 411 to make good decisions when buying/selling real estate, and hopefully pay less taxes to Uncle Sam.