Episode 79: How Long Will the Step-Up-Basis Loophole Last?

Families that aren’t quite rich enough to be affected by the Estate Tax, but have built wealth over time, have another benefit available to them called the step-up-basis loophole. Essentially, what happens with the step-up-basis loophole is when you pass on an investment to your beneficiaries, the present value at the time of your death becomes the new basis for that investment. This will wipe out the capital gains on that investment and can be a great deal which compares favourably to inheriting a Roth 401(k). Anything over $23.16 million in your estate will be subject to a punitive estate tax of 40% when you die. But if you have an estate that is worth less than $23.16 million in your taxable bucket, that money can go tax-free to the next generation. What happens to loopholes as time wears on? They become the target of a revenue-starved federal government. There are four reasons why, while this may sound like it compares favorably with a Roth IRA, it is not the best idea. If you rece...