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Your Estate Plan Can Include Step-Up In Basis Of Highly Appreciated Property

step-up basis your estate plan highly appreciated property

If you’ve never heard of step-up in basis, don’t worry, you are not alone. And many of those who do know about it, use it incorrectly. So, for starters, I’ll explain what it is.

Step-up in basis is a tax provision that provides savings on highly appreciated property such as stocks, bonds and real estate. This is a provision that is best declared in your estate and asset protection plan.

How Step-Up in Basis Works

Tax basis is what the IRS considers you to have paid for an asset – in other words it is the original purchase price. When you sell an asset that has appreciated, you owe capital gains on the difference between what you paid for it and the value of it at the time you sell it.

Some assets like real estate, stocks and bonds are held for generations and passed from their original owners to heirs. If these assets are never sold, they are never subject to capital gains taxes. However, if the heir chooses to sell the asset, any tax would be assessed on the new basis, meaning only appreciation after the asset had been inherited would face capital gains tax.
While the provision can help reduce the burden of the capital gains tax, it does not apply to the estate tax.

The step-up in basis provision adjusts the value, or “cost basis,” of an inherited asset (stocks, bonds, real estate, etc.) when it is passed on, after death. This often reduces the capital gains tax owed by the recipient. The cost basis receives a “step-up” to its fair market value, or the price at which the good would be sold or purchased in a fair market. This eliminates the capital gain that occurred between the original purchase of the asset and the heir’s acquisition, reducing the heir’s tax liability. Taking advantage of this step-up in basis can be a valuable tool as you create your estate plan.

Instead of giving assets away on your death bed, establish an estate plan that includes step-up in basis for your highly appreciated property. Give our office a call and let’s get started. The sooner the better. The potential tax savings can be significant.


Looking to find an experienced estate lawyer in the Georgia area who is skilled in asset protection and estate plan preparation? Shannon Pawley is an attorney in Georgia with expertise in estate planning and asset protection. Shannon can provide assistance with creating an estate plan to include making a will and how to establish a trust properly. If you have questions about asset protection or questions about making an estate plan, reach out to Shannon and she will be glad to help answer all the estate planning questions you might have!

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