Step-up in basis

A special provision of the tax code, known as step-up in basis,  applies to appreciated taxable assets at death. In most instances, a property's tax basis is stepped-up to fair market value at the time of the decedent's death, or, alternately, at a valuation date six months later. Step-up in basis can differ, however, depending on how the property is titled.

Property titling and step-up in basis
The actual tax basis of stepped-up property will differ depending on how the property is titled.

Sole property
For sole ownership and sole or separate property held in a revocable trust the death of the asset owner results in the asset's stepping-up in value.

Joint tenancy
For assets held in joint tenancy, stepped-up valuation applies only to the deceased partner's share of the property.

Community property
Community property steps up whenever a spousal partner dies.

Step-down valuation
If a decedent's adjusted basis in property is higher than the fair market value, the beneficiary's basis will equal the fair market value of the property at the time the decedent dies.