President Obama proposed a major change that can impact how inherited assets are treated during his 2015 State of the Union Address. Under the President’s plan, the step-up basis rule for capital gains would come to an END. For example, husband and wife buy stock valued at $1,000 in 1990. At the time of Husband’s death in 2014, the stock is valued at $1 Million.
Under current law, all of the capital gain ($999,000) is not taxed if your beneficiaries sell the stock.
Under Obama’s proposal, the beneficiaries would end up paying a hefty capital gains tax on the gains. While it is impossible to know whether these proposals will become law in the future, the President’s speech should serve as a reminder that it is essential to have a comprehensive, up-to-date estate plan in place.
