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When someone passes away, their heirs often receive a “step-up” in the cost basis of inherited assets, which can significantly reduce capital gains taxes. But not all transfers qualify for this valuable tax treatment. Understanding which assets don’t receive a stepped-up basis is just as important as knowing which ones do—especially when crafting a thoughtful estate plan.

What Is a Stepped-Up Basis?

A "stepped-up basis" adjusts the cost basis of an asset to its fair market value at the owner's date of death. This means that if the asset is sold shortly after being inherited, there may be little or no capital gains tax. However, certain transfers and types of property don’t qualify.

Transfers That Do Not Receive a Stepped-Up Basis

1. Lifetime Gifts

If you gift an asset to someone during your lifetime, they inherit your original cost basis—known as a carryover basis. This means any appreciation during your lifetime is still subject to capital gains tax when the recipient sells it.

2. Assets in Irrevocable Trusts (If Excluded from the Estate)

Assets transferred to an irrevocable trust may not receive a step-up in basis if they are not included in the decedent's taxable estate. The key issue is whether the decedent retained sufficient control or interest in the trust.

3. Jointly Owned Property (Depending on Contribution)

In joint tenancy with right of survivorship (JTWROS) or tenancy by the entirety, only the deceased owner’s portion receives a step-up in basis. The surviving owner’s share retains its original basis unless it can be shown they didn’t contribute to the purchase.

4. Retirement Accounts

Accounts such as IRAs, 401(k)s, and annuities are considered income in respect of a decedent (IRD) and do not receive a stepped-up basis. Beneficiaries are taxed on distributions at their ordinary income tax rates.

5. Income in Respect of a Decedent (IRD) Assets

These include:

- Accrued but unpaid wages or bonuses

- Deferred compensation

- Uncollected business income

- Installment sale balances

- U.S. savings bonds (e.g., EE or I Bonds)

- Accrued interest or dividends

These assets pass with their existing value and are taxed as income to the beneficiary.

6. Grantor Trusts Without Estate Inclusion

Assets in certain irrevocable trusts where the grantor retains no interest may not be included in the estate and therefore don’t receive a step-up. It depends heavily on the trust’s structure.

7. Some Business Interests

Certain partnerships and LLCs taxed as partnerships may limit the ability to apply a step-up in basis to underlying assets, especially where special tax elections (like §754) are not made.

8. Out-of-State Joint Property (in Community Property States)

In community property states, the entire property may receive a step-up when one spouse dies—but only if it’s titled as community property. If titled as joint tenancy, only half may qualify.

Why It Matters for Your Estate Plan

A key goal of estate planning is to minimize taxes for your beneficiaries. If you transfer assets during your lifetime or place them in structures that aren’t included in your estate, you may unintentionally forfeit the step-up in basis, leading to higher tax bills for your heirs.

If you have questions about how to protect your family's financial future and take advantage of the step-up in basis, contact Bart Scovill, PLC. We’re dedicated to helping Florida families plan wisely. https://scovills.com/?p=2498

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Few names are more recognizable in professional wrestling than Hulk Hogan. From his days headlining WrestleMania to his reality TV appearances, Hogan has lived much of his life in the spotlight. Off stage, he has also been through a highly publicized divorce, financial ups and downs, and ongoing questions about his wealth and property.

When celebrities face estate disputes, they tend to make headlines. But the truth is, estate planning issues that can affect Hulk Hogan’s estate are the same ones that can affect Florida families every day.

Celebrity Estates Draw Attention for a Reason

Hogan has owned several homes in Florida, including a waterfront estate in Clearwater. Because Florida’s homestead protections are some of the strongest in the country, his property ownership and estate planning decisions will determine how — and to whom — his assets can be passed.

Just as we’ve seen with other celebrity estates, the lack of a clear estate plan can spark confusion, family disagreements, and even litigation. A famous name just makes it more public.

Why Estate Planning Is Critical in Florida

Even if you don’t own a mansion on the water, Florida law applies to your home and property the same way it does for celebrities. Some key considerations:

Florida Homestead Protections

Florida’s constitution shields a homestead property from most creditors and restricts how it can be left to heirs. Without a properly structured estate plan, a surviving spouse and children may end up sharing interests in a property — sometimes leading to disputes or forced sales.

Divorce, Remarriage, and Blended Families

Hogan’s divorce and later remarriage highlight a common issue: estate plans must be updated after major life changes. Florida statutes can unintentionally give shares of an estate to former spouses or stepchildren if planning documents are outdated.

Privacy and Probate

When estates go through Florida probate, the court process and filings are public record. Celebrities are not the only ones who may want to avoid public exposure of their finances. A properly funded revocable trust can help keep family matters private.

Asset Protection and Financial Ups and Downs

Hogan has faced lawsuits and financial troubles over the years. For any Floridian, structuring ownership and beneficiary designations correctly can provide stability and help protect family members if unexpected financial issues arise.

The Lesson from Hulk Hogan’s Estate

Estate planning is not just for the rich and famous. The very issues that make headlines in celebrity estates — homestead restrictions, blended family disputes, probate battles — are the same ones that can create challenges for everyday Florida families.

By taking the time to put a thoughtful plan in place, you can protect your home, reduce stress on your loved ones, and ensure your wishes are carried out. https://scovills.com/?p=3023