Wills and Trusts

Wyatt, Tarrant & Combs, LLP

MAXIMIZING AND MULTIPLYING THE “STEP-UP” IN BASIS – Part I

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MAXIMIZING AND MULTIPLYING THE “STEP-UP” IN BASIS

Generally

As discussed  in previous posts, estate planning will increasingly focus on the income tax savings resulting from the “step-up” in basis.  Estate planners will seek to maximizing the “step-up” up in basis by ensuring that the assets that are includible in the estate of a decedent are the type of assets that will:

  1. Benefit from a “step-up” (avoiding the inclusion cash or property that has a basis greater than fair market value)
  2. Benefit the most from the “step-up” (for example, very low basis assets, collectibles, and “negative basis” assets); and
  3. Provide significant income tax benefits to the beneficiaries (assets are likely to be sold in a taxable transaction after “step-up” or depreciable/depletable assets giving rise to ongoing income tax deductions).

In addition to the foregoing, estate planners will increasingly seek to:

Maximize the value of certain assets because the step-up” in basis is based on fair market value (rather than trying to reduce the value for transfer tax purposes); and

Intentionally create estate tax inclusion, especially if the decedent lives in a state with no state death tax and if the decedent has significant unused Available Exclusion Amount above his or her assets.

 

Turney P. Berry

Louisville, Kentucky

Leave a reply. Please note that although this blog may be helpful in informing clients and others who have an interest in information privacy and security, it is not intended to be legal advice. The information on this blog also should not be relied upon to form an attorney-client relationship.

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