Frequently Asked Questions (FAQs)
Taxes
What is a “stepped-up” basis?
When an individual sells an asset, such as a stock, that is a taxable event; the gain, the difference between what it sold for and its basis, is taxable. The basis is what the individual paid for it. However, if the individual continues to own the stock until he or she dies, the basis is stepped up at death, that is, the basis is increased to the value at the time of death. That will minimize if not eliminate any gain when the stock is sold by the Successor Trustee or personal representative. In short, a stepped-up basis is generally a good thing. For this reason, we generally recommend that clients who wish to transfer appreciated assets to their children do so by will or trust, rather than by lifetime, or inter vivos, gift.
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FAQ Categories
- Living Trust
- Living Trusts and Probate
- Funding a Living Trust
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