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Discover the latest news, cases, and estate planning insights in Florida at Knudsen Law Blogs. Our dedicated Tampa estate planning attorneys delve into crucial legal topics to keep you well-informed and equipped to protect your assets and loved ones. Stay up-to-date with relevant information and make well-informed decisions for your future with our expert guidance.

Tampa Estate Planning Attorney / Blog / Estate Planning / IRS Ruling 2023-2: Why Your Children Could Pay Capital Gains Taxes in Tampa

IRS Ruling 2023-2: Why Your Children Could Pay Capital Gains Taxes in Tampa

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An experienced estate planning lawyer in Tampa will keep you informed of any tax changes that could affect your family. One recent change is IRS Ruling 2023-2, which went into effect in 2023. This new rule changes the way assets are inherited, and it means your children could be more likely to pay capital gains taxes when you pass away. What does this ruling mean for you – and how do you keep more wealth in the hands of your loved ones?

Understanding the Step-Up in Basis 

To understand the significance of IRS Ruling 2023-2, you must first understand a concept called the “step-up in basis.” After you pass away, a loved one might inherit your real estate, stocks, or collectibles. There may be outstanding capital gains implications associated with these assets.

As any Tampa resident will tell you, real estate prices have skyrocketed over the past few decades. Your home might be worth twice or even three times its original price. The same logic applies to stocks, and the S&P 500 has soared over the past few years. Even old baseball cards, stamps, or vintage cars could be worth millions today – despite being purchased for almost nothing during your younger years.

The good news is that when your loved ones inherit these assets, the step-up in basis usually removes these capital gains implications. When your loved ones receive these assets, the initial purchase price is “stepped up” to its fair market value (FMV). In other words, the capital gains issues are wiped away – and your loved one can keep more of your wealth.

How the New IRS Rule Changes the Step-Up in Basis 

The new IRS rule is simple, but it has considerable implications. In order to qualify for the step-up in basis, the assets must be part of your taxable estate. In other words, assets transferred to an irrevocable trust do not qualify for the step-up in basis – and your loved ones may incur capital gains implications when they receive these assets.

Remember, an irrevocable trust is a separate legal entity. It is not part of your taxable estate, and it is completely separate from your own finances. While this may be beneficial for numerous reasons, the new IRS ruling could make trusts less effective for some families. Speak to an estate planning lawyer to learn whether the new IRS ruling requires you to adjust your estate plan.

Can an Estate Planning Attorney in New Port Richey Help With Capital Gains Taxes? 

An estate planning attorney in Seminole may be able to help you reduce capital gains taxes for your family. Ruling 2023-2 is a notable shift for the IRS, but numerous strategies could circumvent this issue. The most appropriate course of action depends entirely on your family’s unique circumstances and priorities. To discuss this subject in more detail, consider a consultation with Knudsen Law today.

Sources: 

content.govdelivery.com/accounts/USIRS/bulletins/351c426?reqfrom=share

finance.yahoo.com/news/want-leave-assets-heirs-irs-105000681.html

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