Fair market value will influence taxes on a property.
Do you own a vacation home in another state?
Are you wanting to pass it to your children when you die?
Many people choose to leave vacation property to their children rather than sell.
After all, you and they may have made a lot of memories and invested a lot of laughter in the walls there.
According to a recent nj.com article titled “Cost Basis for and Inherited Vacation Home,” you may want to take taxes into account on the property.
You must first find out if the inherited property is taxable.
This is determined by the basis on the property.
This is usually done in one of two ways.
The first method is to use the fair market value on the date the decedent passes away.
The second method is to use the fair market value on the alternate valuation date should the executor of the estate choose to do so.
The inheritor can get the fair market value from the executor of the estate.
In fact, in some instances the executor is required to provide the fair market value to the beneficiary of the property.
What if you own only a portion of the property when you die?
Only this portion may get a step-up in basis.
Does a step-up in basis depend on whether you owe federal or state estate or inheritance taxes on the property?
Even so, the value of the property reported by your children as their basis must equal the value reported on the federal estate tax return.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: nj.com (July 24, 2018) “Cost Basis for and Inherited Vacation Home”