The Listen to Lawrence Letter: Step up in Basis

CLIENT QUESTION:

My home is in an irrevocable Medicaid trust created by you 3 years ago with my two children listed as beneficiaries.  Upon my death, will the beneficiaries selling the home qualify for a stepped-up basis? Is the date of step-up my death or when the house went into the trust? Thank You.

MY RESPONSE:

There will be a full step-up in tax basis upon your death. The tax basis at the time the house went into the trust is irrelevant unless the house is sold while you are still living.

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