Large gifts that shrink an estate for tax purposes no longer make sense for many people now that the federal government taxes only estates larger than $5.34 million, or $10.68 million for couples. With that threshold (which adjusts for inflation and which Congress has called permanent) so high, many financial advisers recommend that their clients wait until they die to give their assets away. The inheritance approach can lower capital-gains taxes if the heirs then sell those assets. Taxpayers are taking advantage of a tax break known as the “step-up in basis,” in which the cost basis of a house, stock or other asset is determined by its current market price rather than when the deceased person acquired it. Heirs get the step-up when they inherit the asset, and it can save them a lot in capital-gains taxes when they sell.
Wall Street Journal March 28, 2014
