How a Trust Can Help Avoid Taxes

March 22, 2022    |    Sage Capone

Establishing an estate plan will help your family avoid capital gains tax. When you pass away, and the beneficiary of the trust inherits your real property assets they may be able to avoid paying capital gains tax on those assets that have appreciated in value since the real property was purchased.


For example, if the property value was $100,000 when you first purchased the property and is now $800,000 at the time of passing those assets will be provided to the beneficiary as a step up in basis for the value of the date of death of the owner.


This means that when the assets are transferred to the beneficiary, the asset value at the date of death becomes the new value at that time. So, if it was $1,000,000 when you pass the beneficiary inherits the million-dollar value without having to pay the difference for capital gains back in that period of appreciation. This is the main reason why it makes more sense to keep the property in trust and provide that step up in basis to your beneficiary so that they can avoid paying any if at all capital gains tax.