January 23, 2023

If you’re anticipating receiving significant inherited assets, it’s crucial to know that these rules can be complicated. Depending on what you pass on and the strategy you choose to do it, or the circumstances in which you inherit, the person receiving the asset may be responsible for taxes. It’s in your best interests to plan ahead and determine all possible tax consequences, including to understand when a step up in basis applies.

There are some situations when a beneficiary may be able to benefit from what is known as a step up in basis provision for taxes. This allows you to have the inherited property receive a valuation equal to its fair market value at the time of the person who owned it passed away, rather than the lower price at which it was originally purchased.

The primary reason for doing this is to help minimize capital gains taxes on inherited assets that appreciate over time and gain significant value. Inheritance rules can be very specific and complex, especially depending on where you live. The support of an experienced and qualified financial professional may be necessary for helping you to work through the most appropriate ways to allocate your inheritance and to ensure that you’ve considered all possible options. You may be able to adjust your transfer strategy to better account for tax implications.

At Shah Total Planning, we work with many people who are navigating this process for the very first time to create both short term and long term financial goals that incorporate maximum use of the inheritance. Set aside a time to meet with a member of our team today to discuss upcoming gifts and taxes.