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].

There are certain tax rules to keep in mind regarding transfers of wealth. They will impact how much beneficiaries receive and influence the inheritance strategies families implement."Millennials and Gen X will inherit the largest share of that, with Gen Z following after," he said. "These generations think about money differently than baby boomers did; more emphasis on flexibility, experiences, and in some cases, sustainability, and that will shape how this wealth transfer plays out in the economy."Kautzma ...