When it comes to your financial legacy, business owners and executives who accumulate a significant amount of their net worth in their company’s stock rely on the current tax law stating that the basis in assets left to heirs is “stepped up” at death, to the fair market value of the assets left to heirs. Your heirs would not have to pay capital gains tax on a stock worth $500,000 when you received it, which is now worth $3 million. President Biden’s The American Families Plan narrowly escaped, including a proposal to eliminate the step-up in basis (subscription required). A second attempt was made earlier this year, as part of the president’s 2023 budget proposal, to end step-up basis for capital gains over $5 million ($10 million for couples).
Because these attempts have failed so far, few of the assets of many business owners and others who have acquired illiquid wealth have benefited from the step-up basis. Trust assets held by irrevocable grantors are an exception.
