Editor's Note: This article is part of the Financial Advisor series "How I Solved It." Advisors describe a problem client and what they did to help.

Not long ago, a client approached Dr. Steven Podnos for advice. Specifically, he was concerned about his father's financial well-being. Podnos, a medical doctor who is also a CFP, is the principal of Wealth Care, a fee-only RIA with offices in Merritt Island, Fla.; Austin, Texas; and Washington, D.C.

"The son, who lives in North Carolina, was worried that his father [in Cocoa Beach, Fla.] was being financially abused," Podnos recalled. "And he was." The father's bank was charging him an exorbitant 2.5 percent "wrap fee" for a bundle of investment services.

"His son sought a fee-only planner [and] called me to set up a meeting with his father and him when he was visiting Florida a few weeks later," said Podnos.

Fixing the inflated wrap-fee was easy enough. Podnos put an end to that by taking over management of the father's assets. But there were other issues.

The father had a portfolio worth in excess of $1.5 million, much of it inherited. In addition, his wife had just died, leaving him an irrevocable trust that held another $1 million in stocks. That trust, it turned out, was a key problem.

At the meeting, Podnos learned that the late wife's trust held stocks with a very low basis. Upon her death, it became an irrevocable trust, and the stocks gained a small step up in basis. "But they were still at just a fraction of their current value," he explained.

The primary downside of this: If and when he or his heirs sold the shares, they would have to pay taxes on the gain in value over their basis, not their true market value at the time they were inherited.

The father was an old man, a retired Air Force officer living on his pension and Social Security. He was the sole beneficiary and trustee of his late wife's trust. Years earlier, the trust had seemed a smart way to avoid estate taxes, which were then higher. Irrevocable trusts remove assets from the taxable estate, making them not subject to estate tax when the grantor dies. But bypassing the estate tax meant forfeiting the step up in basis, leaving heirs with a potentially hefty capital-gains tax.

"I suggested he move the stock out of his wife's trust into his own revocable living trust," said Podnos. That way, Podnos said, "when he dies, his heirs will get a second step up to current market value."

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