Sitting on $11 million? Give it away to save on estate taxes


“The higher exemption is a boon for people with large estates,” said D’Addio, referring to individuals with estates that are near or over the $11.18 million exemption.

By making gifts in their lifetime, these people move wealth and its appreciation out of their estate, reducing the amount that’s subject to the estate tax once they die.

Outsized gifts may not make as much sense for families with smaller estates, particularly those that are under $5 million.

Instead, it might be more advantageous for these individuals to hold onto their assets until death, which would allow beneficiaries to get a “step-up in basis.”

This means that the heir receives the asset valued as of the date of death — this is the step-up in basis. If the beneficiary sells the asset right away, he or she won’t pay any capital gains taxes.

See below for an example of how a “step-up in basis” works when a son inherits a stock from his father, valued at $40 on the day of death.

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