Attorney Thomas B. Burton explains how you get one shot at new basis at death and why it is wise to not waste this opportunity to save on capital gains tax for your heirs when planning your estate plan disposition for highly appreciated items.
Transcript of Video: What You Should Know About Long Term Capital Gains Tax and New Basis At Death
What is new basis at death or a step-up
in basis at death this is a very
important concept for your estate
planning and one that many people don't
think about there are good reasons for
leaving certain assets to your children
or heirs at death versus gifting it
outright during life for instance real
estate is often a highly appreciated
asset let's take an example of a home
bought in 1950 for $50,000 that let's
say your grandparents bought then they pass
away in 2017 in the home is worth
$500,000 if they had given the asset to
their children in 2016 the children
would have received the basis they
bought it at of $50,000 if instead they
left it to the children in their will or
trust in 2017 the children would be
entitled to new basis or stepped-up
basis at death this means the children
could sell the home for the fair market
value of $500,000 and owe no capital
gains tax with the long-term capital
gains tax rate of 15% this is a
significant tax savings if instead the
children were deeded the home in 2016
and they sold it for $500,000 after their
parents passed away they would owe the
difference between $500,000 and $50,000
which is $450,000
at a fifteen percent
capital gains tax rate now that's a
simplified example but the point of this
is to think carefully about which assets
that you give away during life versus
giving away at death you get one chance
at the stepped-up basis at death and
it's wise to make good use of it please
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Transcript and captions provided for ease of access for the hearing impaired.
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