Estate Planning & Living Trusts
26. Recent Change In This Law
There has been a recent change in this law.
Before January 1, 2010, all inherited assets received a full step-up in basis to the current market value as of the owner's death. This saved the beneficiaries thousands of dollars in capital gains tax when the assets were sold.
Beginning January 1, 2010, the amount of assets that can receive a step-up in basis is now limited. Most estates will be able to step up $1.3 million worth of assets. An additional $3 million of assets left directly to a surviving spouse can also be stepped up to full market value.
Assets that do not receive the stepped-up value will be taxed based on the deceased owner's original cost basis...what the owner paid for the asset...or the fair market value, whichever is less.
This is going to be an accounting nightmare for many families: How many of you have the original receipts showing what you paid for all of your assets? Let's hope Congress changes this law very soon!