Income Tax Basis in Estate Planning – Part 2

When considering different estate planning strategies and which direction to take, it’s important to consider the impact on basis. “Basis” is the benchmark used for income taxation. What does income tax basis have to do with estate planning? Property included in your taxable estate at your death gets a “step-up” in basis to its value at your death. (Certain property like IRAs don’t get this step-up.) However, when you gift an asset, the basis generally goes with the asset. Let’s say you purchase stock for $200,000 and it appreciates to $500,000. You are diagnosed with a terminal illness. You want to put a simple do-it-yourself plan in place and you’ve heard probate can be cumbersome. So, you decide to give the stock to your son before you die. Doing so certainly avoids probate. You succumb to the illness. Your son sells the stock after your death. Unfortunately, the stock did not receive a step-up in basis at your death because…

Read more detail on Recent Legal Marketing posts –

This entry was posted in Legal Marketing and tagged , , , , . Bookmark the permalink.

Leave a Reply