stepped up cost basis
Client passed away. In order to have the stepped up cost basis:
- the account has to be transferred/renamed into the estate account, then liquidated and check sent to the estate of so and so correct?
- if the executor just liquidates the account that is in his deceased mothers name, they would lose the cost basis, correct?
Thank you,
Douglas
Permalink Submitted by Alan - IRA critic on Tue, 2025-08-26 17:43
Q 1 – That’s correct if the estate inherited the account per will or intestacy. However, if the account had a named beneficiary (TOD), the estate is not involved. In either case there will be a basis step up to the DOD value, either for the beneficiary or the estate if the executor sells the asset.
Q 2 – No, the estate still gets the basis adjustment to the DOD value.
Note that the basis adjustment will only be 50% if jointly owned by spouses in common law states. But if a child inherits the holding, there will be a 100% basis adjustment to the DOD value.
There are exceptions. For example, if the child owned the asset previously, but gifted it to ill mother within 1 year of her death, then re inherits that asset, there is no basis step up.