Massachusetts Estate Planning & Asset Protection Blog

Step Up Basis Part 1

Posted by Dennis Sullivan & Associates on Mon, Mar 02, 2015

Losing the Step Up Basis Could be a Step Back On Your Estate Planning | Massachusetts Estate Planning Attorney



A few weeks back, President Obama proposed, in his State of the Union address, that the “step up in basis” provision of the capital gains tax be eliminated.  While Obama claims that he wants to eliminate a loophole for the rich, such a change could have a bigger impact on the average middle-class American.

             Before I explain why, let’s review just what exactly what the step up in basis is.  Certain assets, such as stocks, mutual funds and real estate, appreciate in value over time.  Joe bought stock in Apple for $10.  If it is now worth $1,000 and he sells it, he will have a gain of $900.  That $900 gain is subject to something called capital gains tax.  The gain is calculated by subtracting the sale price minus the basis, which usually is the purchase price. (There are cases where the basis gets adjusted but we’ll keep our example simple.)

            There are certain instances where Joe may not have to pay capital gains tax.  One such instance is if he holds onto that stock and don’t sell it before he dies.  Instead, he transfers it to his heirs as part of his estate.  They now own it and the tax that comes with it.

             If his heirs then sell it for $1,000, must they pay tax on the $900 gain?  The answer is no. This is because of something called the step up in basis.  Upon the date of his death Joe’s stock “steps up” in value to $1,000.  So if the market value is $1,000 on Joe’s date of death, and his heirs sell it for its stepped up value of $1,000, the gain will now be zero and all the unrealized gain tax from Joe’s lifetime disappears. 

             This can be a huge tax break for many families.  For example, if Paul purchased Microsoft or IBM stocks many years ago and held onto them as they multiplied; he would have accumulated significant gains over the years.  If he holds onto his stocks until he dies and then his children inherit it, the tax on all that gain is gone and they will owe nothing in taxes if they sell it.  This could amount to tens of thousands of dollars tax-free for his family.  On the other hand, if Paul was to transfer the stock to the children while he is alive they get his original basis, what is called a “carryover basis”.  They’ll have to pay tax on all the unrealized gains based on the original price that Paul paid for the stocks.

            Now that you know how the step up in basis works, next time we’ll tell you why President Obama’s proposal could miss the mark on targeting the wealthy and instead have a greater impact on middle-class America.



At the Estate Planning & Asset Protection Law Center, we provide a unique education and counseling process which includes our unique 19 Point Trust, Estate and Asset Protection Review to help people and their families learn how to protect their home, spouse, life-savings, and legacy for their loved ones, click here for more information. We provide clients with a unique approach so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future.

We encourage you to attend one of our free educational workshops, call 800-964-4295 and register to learn more about what you can do to enhance the security of your spouse, home, life savings and legacy.


Click Here to Register For Our Trust, Estate & Asset  Protection Workshop

Tags: taxes, Obama, middle class, Inheritance, 2015, Capital Gains Tax, proposed changes, heir

Massachusetts Estate Planning Attorney | Powers of Attorney - 7 Things You Need to Include!

Posted by Massachusetts Estate Planning & Elder Law Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Mon, Oct 08, 2012

Powers of Attorney - 7 Things You Need to Include!

Do You Have Them?

It never fails.


A prospective client comes into the office and is very old or very ill, or both.  The client proclaims they have powers of attorney.


We take one look at the powers of attorney and, with a gasp, realize that the documents they have are outdated and nearly worthless.power of attorney, medicaid, medicare




Because their powers of attorney are just "plain-vanilla".


There are no specific authorizations inserted for:


- public benefits planning, Medicaid, Medicare,  etc.

- Social Security elections

- retirement planning elections

- gifting for Medicaid benefits planning or tax planning

- account changes

- options for housing changes

- tax planning authority


Be careful though, some of these powers can create tax problems if not customized properly.


So, don't rely on old outdated powers of attorney that were done years ago with no forethought toward what is required during the senior years.


Remember, a long-term care spend-down can totally deplete remaining assets. This is what is most devastating to the middle class these days.


Get updated powers of attorney that have appropriate authorizations (especially long-term care authorizations).


Also, one must do this before mental incapacity closes the window of opportunity.


Don't rely on some old outdated documents that have been laying on the shelf for years. 


Bottom Line: What worked for you or a client at age 25,or even at age 50, may not work for you at age 65.


We have developed our Unique Self-Guided 19-Point Trust, Estate, & Asset Protection Legal Guide, so you can learn where problems may exist in your planning as well as opportunities for improvement and how to implement a plan to protect your spouse, home, family, and life savings.

Click Here to Download our Trust, Estate, & Asset Protection  Legal Guide


At the Estate Planning & Asset Protection Law Center of Dennis Sullivan & Associates, we help people and their families concerned with losing their homes and life savings to increasing medical and nursing home costs, taxes and the costs and time delays of probate. We also protect clients from losing control of their own health and financial decisions.

We encourage you to attend one of our free educational workshops to learn more about our process and what you can do to enhance the security of your spouse, home, life savings and legacy. To register for a seat at an upcoming workshop call (800) 964-4295 (24/7) or register online at

Tags: Medicare, Medicaid, taxes, social security, power of attorney, middle class, incapacity, tax

Sign-Up Below To Receive Your Free Report

Follow Me

Browse by Tag

Follow DennisBSullivan on Twitter