There have been recent news articles about some changes the IRS made concerning inheriting assets from trusts. According to the article, in March the IRS issued Revenue Ruling 2023-2. The new Ruling states that property held in an irrevocable trust is not included in the taxable estate at death will no longer receive a step-up in basis. That ruling is consistent with the existing law. In short, assets in a trust that are part of your gross estate (like assets in the ipug and revocable trusts my office does for clients) get an adjusted basis upon death. Assets in trusts that have taken the assets out of the client’s gross estate (like the trust in the subject IRS case) don’t get an adjusted basis.
At our office, Kentucky Estate Planning Law Center, we typically use a specific type of irrevocable trust that does not remove the assets from the client’s gross estate. Thus, if you have an irrevocable trust that does not remove the asset from your taxable estate then you can rest assured knowing the new IRS ruling does not relate to your type of trust. There are many benefits to the kind of trust that we use. The trust protects assets from lawsuits and future creditors like a nursing home and protects the assets you have worked so hard to save for your family. Another great benefit is that the assets in the trust, such as the home or farm, will still receive the adjusted step-up in basis upon the death of the grantors of the trust.
If you have questions about the new IRS ruling call our office at 270-982-2883 and we will schedule you for a free workshop that covers all of the potential threats to your estate plan, which includes information about the taxes and how they could impact your estate plan.