An IRS ruling sparked fears about trusts, but it doesn't eliminate them or probate avoidance. The step-up-in-basis rule still applies to inherited assets through trusts, giving beneficiaries a new tax basis at death and wiping out capital gains tax. Uncertainty remains about whether irrevocable trusts get the same treatment.
The IRS has issued a ruling that is devastating to your finances. Not really, but it is important to many people. Many of you have asked me about the recent IRS ruling. So right off the bat, let me clear up several inaccuracies that I've heard. Has the IRS ruling done away with trusts? No. Has the IRS ruling done away with revocable trusts? No. Has the IRS done away with your ability to avoid probate through a trust? No. Was the president responsible for this? No. Here's the deal. Normally, if you inherit through a trust, you receive a step-up in basis on the asset that you are receiving from the person who created the trust at the time of their death. So let's say your parents leave their home to you through their trust. That means is you will owe no capital gains tax on that home. That is certainly true with a revocable trust and still is, but there had been some question about whether or not that was accurate when it came to an irrevocable trust. In 2015, the Treasury Department began asking questions about this. And prior to
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