Step-Up in Basis
The reset of an inherited asset's cost basis to its value at the owner's death, often erasing capital-gains tax on prior growth.
When you inherit an appreciated asset, its cost basis generally 'steps up' to the fair market value at the date of the previous owner's death. Decades of unrealized gains can effectively disappear for tax purposes: if heirs sell soon after inheriting, there's little or no capital-gains tax on the prior appreciation.
The step-up is a major estate-planning consideration. It can make holding highly appreciated assets until death more tax-efficient than selling and gifting during life, and it interacts with decisions about which accounts to spend down first. The rules can change with legislation, so current law is worth confirming.
This definition is general information to help you understand a term, not financial, tax, or legal advice. Figures that change year to year (limits, thresholds, rates) should be confirmed against current official sources. For guidance on your situation, a licensed fee-only fiduciary is the right next step.