Core Viewpoint - The recent IRS rule change regarding the step-up in basis for assets held in irrevocable trusts significantly impacts estate planning strategies, particularly for those looking to minimize tax liabilities for heirs [5][6]. Group 1: Step-Up in Basis - The step-up in basis allows inherited assets to reset to their current fair market value, eliminating tax liabilities on unrealized capital gains [2]. - For example, if an asset purchased for $100,000 is sold for $250,000, the capital gains tax applies only to the profit above the original basis unless inherited, where the basis steps up to $250,000 [3]. Group 2: Irrevocable Trusts - Irrevocable trusts are used to protect assets, as the grantor relinquishes ownership rights, allowing the trust to own the assets for the beneficiaries' benefit [4]. - The new IRS ruling (Rev. Rul. 2023-2) stipulates that assets in an irrevocable trust must be included in the taxable estate of the grantor to qualify for the step-up in basis [5]. Group 3: Estate Tax Implications - The $13.61 million per-person estate tax exclusion in 2025 means that most estates in the U.S. will not incur estate taxes, benefiting heirs by allowing them to receive a step-up in basis [6]. - In 2021, only 42% of estates required to file estate tax returns actually paid any tax, indicating a low tax burden for most estates [7]. - However, the estate tax exemption limit is set to revert to $5 million in 2026, which could affect future estate planning strategies [7]. Group 4: Reasons for Using Irrevocable Trusts - Individuals often use irrevocable trusts to qualify for Medicaid assistance by removing assets from their ownership, allowing for tax-free transfer of properties to heirs [8].

Core Insights - The article discusses the considerations for selling a home in an irrevocable trust and the implications of downsizing, particularly in high-tax areas like Long Island [2][4]. Group 1: Financial Considerations - The couple has a combined monthly Social Security income of $7,000, with savings of $600,000 in a high-yield savings account earning 4% APR [1]. - The current home is valued at approximately $1.2 million, raising questions about the necessity of purchasing a new home of equal value if sold [2][4]. Group 2: Trust and Legal Implications - Selling a home in an irrevocable trust requires alignment among family members, particularly the grantors and trustees [4]. - The terms of the irrevocable trust will dictate the process and implications of selling the home, necessitating consultation with an estate attorney [7]. Group 3: Downsizing Options - Downsizing is common for retirees, especially those in large homes or expensive areas, and it is advisable to research potential new neighborhoods or housing types before selling [5]. - There are various housing options available for older residents, such as cooperatives and condos, which offer amenities that cater to their lifestyle needs [6]. Group 4: Tax Implications - If the couple has lived in the home as their primary residence for two of the last five years, they may qualify for a $500,000 exemption on the profit from the sale, which is $250,000 for single taxpayers [8].