Whether you own primary property or a vacation property in Virginia Beach, you need to plan for its future. The transfer of property can happen in a variety of ways and you should discuss your options with an estate planner.
Many estate planning tools can help you to transfer assets smoothly and with more control than an outright gift. One of these includes trusts. If you end up putting a piece of property, such as a condo or vacation home into a trust, you may be curious about whether or not this will get a stepped-up basis if it is sold after you pass away.
For most irrevocable trusts, and for all revocable trusts, the step up and basis likely applies. Trusts can be very helpful for managing out of state property and to avoid two separate probate processes that may occur after the death of the owners – the one in which the out of state property is located and the one in which the owners lived. Irrevocable trusts are typically used for asset protection, but you may need only a revocable trust. A step up in basis has to do with the calculation of the gains on the sale of the property for tax purposes.
Your capital gain is the difference between the net proceeds on the sale of the property and the overall basis. The initial basis for a piece of property is the purchase price of that property and can include the cost of any improvements that have been added.
A step up in basis is another adjustment that occurs when the original owner passes away. That basis is then adjusted to the date of death fair market value on the property. The new basis is almost always higher than the initial one. Make sure that you discuss the possibility for a step up in basis with real estate with your estate planning professional in Virginia Beach.