The Joy Of Inheriting Appreciated Property in Virginia

House-Swapping-420x0When you inherit property, such as a house or stocks, the property is usually worth more than it was when the original owner purchased it. If you were to sell the property, there could be huge capital gains taxes. Fortunately, when you inherit property, the property’s tax basis is "stepped up," which means the basis would be the current value of the property.

The transfer of any asset from an estate to an heir can trigger tricky tax issues. Sometimes things can get even more difficult when it comes to a tricky tax like the capital gains tax, so it is worth knowing the ground rules ahead of time.

ElderLawAnswers.com recently considered this subject and the key rules of thumb in an article titled “Do You Pay Capital Gains Taxes on Property You Inherit?

In the normal course of things post-mortem, the estate pays any state and federal estate taxes, then the heirs might even pay a state inheritance tax. Thereafter, if the heirs sell any inherited asset, then they may not pay any capital gains taxes if the asset is sold at or below its date of death value. This is the magic of what is called the “stepped-up basis.”

Capital gains are always measured by the “basis”, or the original value to the person being taxed (that is how you measure appreciation, after all). This becomes tricky, however, if the asset in question is “gifted” to an heir while the owner is alive. When this occurs, then the heir is stuck with the original “basis” of the one who gifted the asset.

For example, a home purchased in 1972 and “gifted” in 2013 most certainly will have substantial appreciation given real estate values over 40 years. If the home is later sold by the donee, then substantial capital gains taxes will be owed.

On the other hand, the same home inherited in 2013 by the same heir can be sold with some 40 years of appreciation stepped-up to current fair market value and sold with minimal, if any, capital gains taxes owed.

The capital gains tax is anything but simple. Accordingly, consider this a brief introduction to a complex subject. The simple point to take away is that the timing of wealth transfer has serious tax consequences.

Fortunately, capital gains taxes can be minimized, if not prevented.

You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia.  Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.  

Reference: ElderLawAnswers.Com (August 7, 2013) “Do You Pay Capital Gains Taxes on Property
You Inherit?

Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on Linkdin
Share on pinterest
Share on Pinterest

Leave a comment


We have a LOT more where that came from!

We hate spam too. We will never share or sell your information.

Call Now ButtonCall Us Now https://jsfiddle.net/7h5246b8/

Request a free consultation

We hate spam too. We will never share or sell your information.

We've been putting together as many resources as possible so that we can continue to help:

  • If you’re a current client with a signing appointment or a prospective client with a consultation and would prefer that meeting take place in your own home, we can accomplish that with a little bit of pre-planning on our part and with the addition of a laptop, smartphone, tablet or other computer in your home to facilitate this virtual meeting. For those of you that need to sign legal documents, that too can be accomplished with the use of a webcam (FaceTime etc.), so that we can witness and electronically notarize all of your important legal documents.
  • We launched the rollout of our on-demand webinar early so that new clients and our allied professionals can view the important component parts of ‘an estate plan that works’ at their convenience.  That is available on our website.
  • Live video workshops will be produced as quickly as possible and certainly ahead of our previous schedule; we will keep you posted as these events become available. Given the ‘boutique’ nature of the firm, we rarely have more than ten people in our office including team members at any one time. During this period of ‘social distancing,’ we promise to have no more than 8 people at any time.   This allows us to comply with the Governor’s directive to limit in-person gatherings.
  • The best way to communicate with us is still by phone during regular office hours of 8:30 to 5:00, Monday through Friday, or, you can email any of our team members (that is, their first name followed by @zarembalaw.com).  We will respond to these emails as quickly as possible.
  • Please continue to follow the directives of our local, state, and federal agencies. For your health and in consideration of our team who is assisting you, if you’ve scheduled an office appointment or planned to drop off paperwork and are experiencing a fever, dry cough, or shortness of breath, please contact your primary care doctor for guidance and then our office to reschedule.

Thank you, Walt and the Zaremba Team

Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.