Why You Need to Know About a Step Up in Basis for Estate Planning Purposes?

If you are considering the process of starting your estate planning or you are someone who will be inheriting assets in the future, you need to recognize how step up in basis could influence the value of those assets and your tax obligations. A step up in basis refers to federal tax laws that identify how assets get valued for the purposes of calculating your capital gains taxes.

These can occur when assets are sold, when these assets are left to heirs, or when someone passes away. When someone else inherits the property, the cost basis of a piece of real estate, for example, may change. If someone sells the property for substantial gains, then the resulting capital gains liability is calculated by looking at the step up in basis. The difference between the sale price and the stepped-up basis will determine the capital gains value.

Simply put, a step up in basis means adjusting the cost of an inherited asset up to its fair market value on the date the person passed away, and cost basis begins with the original price paid for the asset.

Working with a qualified estate planning attorney is one of the only ways to understand how this may influence your future assets and to help you plan ahead accordingly. Working with a knowledgeable estate planning lawyer can have many significant benefits for your future.

At our Virginia Beach law office, you