Did You Just Tip the IRS? | Optimizing Social Security

BEFORE PUTTING YOUR KID ON THE DEED: We get this question at least once a week: Should I put my kid on the deed to the house? It comes up with the good intent of avoiding probate, but it almost always triggers an unintended tax consequence down the road. Here is why:

Common story: you (or your parents) bought the home 30 years ago for $300,000. It is worth $1.2 million today. A noticeable $900,000 gain.

If you inherit it without being on the deed, your cost basis “steps up” or resets to $1.2M. That $900,000 of gain disappears with no long-term capital gains tax.

If your parents put you on the deed, the step-up in basis does not apply to your share. When the home sells, you owe capital gains tax on your portion of the gain. Your good intentions just created an unnecessary tax bill.

There are better ways to give your kids access and eventual ownership without handing them a tax bill in the process. Please don’t create an unnecessary tax issue. Tax consequences depend on your specific circumstances, so review title and estate-planning decisions with your tax and legal advisers. If you have questions about how your assets and estate plan are structured, we are happy to take a look.

THE ROTH GENERATION: Wow, look at that trajectory! Gen Z is the Roth generation. Investors have come a long way since the Roth account was created by the legislation in The Taxpayer Relief Act of 1997.

NOT ANOTHER HEADLINE ABOUT SPACEX: Buckle up. This could get interesting! Will SpaceX stock succumb to the historic “mega IPO” norm or blaze its own path?

RETIREMENT AND SOCIAL SECURITY: Just a reminder, your retirement date and claiming Social Security are two different decisions. Please don’t assume these are the same decision. Social Security is best used as a longevity hedge. Too many workers are waiting to retire until they claim early Social Security. We help evaluate Social Security claiming strategies based on your financial plan, tax bracket, net worth, family history, and current health.

DID YOU NOTICE?:

COMPASS ION DISH: Headed south towards Knoxville? Our own Matthew McDaniel has some recommendations. Knoxville sits at the foothills of the Smoky Mountains and Matthew assures us that if you stop by Dancing Bear Lodge, their seasonal menu will be a highlight of your trip. Or, if you find yourself in Knoxville proper, Matthew recommends a local Laotian favorite named Sticky Rice Cafe and ordering the Phorrito or Pork Chops will make you a happy customer!

*The views expressed represent the opinions of Compass Ion Advisors, LLC, as of the date noted and are subject to change. These views are not intended as a forecast, a guarantee of future results, an investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial, or legal advice or service to any person. The information contained has been compiled from sources deemed reliable, yet accuracy is not guaranteed.

Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website here. Past performance is not a guarantee of future results.