Gonna drop this here. 5 or 6 years ago.....we moved our residence to AZ.....which has community property laws. <-- THIS is a BIG DEAL. There are 9 such states....and this could be important to you, or your loved ones. We have been retired for over 20 years when my wife passed in Dec. A sad event for certain.
We had sold our home in MN this year....and MN is taxing me on the gain of some pretty big money as that home had appreciated in value big time.. I think it will cost me $500 k +/- in capitol gains tax. It's gonna bite....but we knew that and decided to do so anyway.
We also had accumulated over 4 million in capitol gains on our stock holdings over that time. Our planner was having allot of difficulty not incurring taxes on our trades these days as we also needed some income. Because we now live in a community property state.....those gains will go un-taxed to me and my basis will be "stepped up" to current values as of the date of my wife's death in December. Her gains....AND MINE!. So I just avoided over a million dollars in capital gains tax....by living in AZ instead of MN. Like a fresh start on our stock investments. Poof....all gains are erased....tax free. Legal....legit.....gone.
Not saying this to flaunt or brag....just wanting to let you know there are often better tax situations available, if you look for them. I wonder how much tax I have already paid to get to the values we attained in our holdings?.....LOTS! ...I expect. Anyway.......
If I owned allot of land in MN with a large amount of capitol gains.....I may consider selling my MN land.....and investing those dollars via a 1031 exchange......to a state with community property laws. Thus at the passing of one of the owners....the stepped up basis would be attained on that land. No capitol gains taxes....you or your spouce could sell the land without incurring that tax after the death of your partner. (same as for stocks or other investments).
Of course....you need to LIVE there for six months of each year. Not hard to do if you chose a good destination. We like AZ.
I do not think many people are aware of this....and the potential huge implications to you....or your spouce. Think of all those family farms that have been held for 50 years or more.....with a basis of pennies on the dollar! Many do not sell because of taxes that would be incurred. While nobody wants to die to save taxes....the community property law allows a means to avoid allot of tax on property or stocks that have appreciated in value. Easy changes to make.....just by living in another state.
I just saved my family over 1 million + + in taxes when I pass along.....as well as further savings at my demise. Seems kinda cold to write this....but it is what it is....and I only hope my experience can help someone else. Death and taxes are quite real. Some states are superior to others. Minnesota ain't one of 'em. Minnesota and some other states like California would like to charge you an "exit tax"....which is illegal....or they would do it.) Just saying. (kinda hate writing this...I just want to help others find some light at the end of the tunnel.)
