What is involved in a step-up in basis?

When assets are inherited, the value of the asset may increase or decrease, depending on the type of asset. In Hawaii, a step-up in basis is when the asset’s value is adjusted to its current fair market value at the time of inheritance. This adjustment will help the inheritor avoid paying capital gains taxes on the appreciated value of the asset. When a step-up in basis is applied, the inherited asset’s basis, or its fair market value, is set at the time of death of the previous owner. This value is based on the current market value, not the original purchase price, and will be used to establish the asset’s adjusted basis for any capital gains and losses tax calculations. If the asset is later sold, the gain or loss is determined based on the difference between the sale price and the adjusted basis. Without a step-up in basis, the inheritor would have to use the previous owner’s original purchase price as the basis when calculating capital gains. This could result in a higher tax liability for the inheritor. Step-up in basis is a beneficial way to pass on assets to heirs with minimal tax liabilities. In Hawaii, at the death of the former owner, the asset’s value is adjusted to the current market value, which is then used as the adjusted basis for capital gains and losses calculations.

Related FAQs

What is the difference between a trust and a corporation?
What is a disclaimer of inheritance?
What is a charitable trust?
What is a charitable lead trust?
What is a qualified terminable interest property trust?
What is a testamentary trust?
What is the difference between a trust deed and a deed of trust?
What is a self-settled trust?
What is anancillaryadministration?
What is a trust protector?

Related Blog Posts

Understanding the Basics of Inheritance Laws: A Guide to Successfully Navigating State and Federal Statutes - July 31, 2023
How to Ensure Your Estate Plan Reflects Your Wishes Through Inheritance Laws - August 7, 2023
Protect Your Rights as a Beneficiary: Understanding Your Legal Rights After Beneficiary Inheritance - August 14, 2023
Comprehending the Duties and Responsibilities of Executors of Estates: How to Properly Administer an Estate and Fulfill Inheritance Law Requirements - August 21, 2023
Maximizing the Benefits of Inheritance Law for Family Heirs of Estates - August 28, 2023