The Best Gift You Can Give is a Step-Up In Basis on Death
-Sunil Sethi, CPA RETIRED
If you are married and want to preserve the potential for a full step-up in basis on California property on death, consider the following:
Community Property With Right of Survivorship: This is one way married couples can hold title to property in California. It means that each spouse owns an undivided half of all community property, which includes property acquired during the marriage. Upon the death of one spouse, the surviving spouse automatically inherits the deceased spouse's half of the community property AND gets a step up in basis on the entire property, not just the half the survivor has inherited from the deceased spouse.
Revocable Living Trust: A revocable living trust is a legal document that allows you to control your assets during your lifetime and specify how you want your assets to be distributed after your death. You can transfer ownership of your property to your revocable living trust during your lifetime. Upon your death, your successor trustee will distribute your assets to your beneficiaries according to your wishes. When community property is held in a revocable living trust and retains its community-property character, it can generally receive a full step-up in basis upon the death of the first spouse.
Additional tips for maximizing your step-up in basis:
Think carefully before gifting highly appreciated property to your heirs during your lifetime. It may be more tax-efficient for them to inherit the property and receive a step-up in basis.
Selling assets before death: If you have investment assets that have depreciated in value, you may want to consider selling them before you die. This may allow you to recognize the capital loss on your tax return, which can offset other capital gains or income.
Proposition 19
Keep in mind that a step-up in income-tax basis is separate from California property-tax reassessment rules under Proposition 19.
It is important to speak with an experienced estate planning attorney to discuss your specific situation and to determine the best way to hold title to your property to minimize your estate taxes and maximize the benefits for your heirs.
Read more about step-up and step-down in basis here.
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If you are considering purchasing or selling a home in Fremont, Give Sunil Sethi Real Estate a Call. We'd love to help you! Our Google Profile
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