The $100,000 Surviving Spouse Tax Trap 🛑

Added: 2026-06-07

[00:00:00]My three favorite words, stepped up basis. You can either have a huge win with this or a huge disaster. Example, you and your spouse own a rental property. It's worth a half a mill or a mill. It could be a commercial property.

[00:00:14]It could be a single family home. It could be an Airbnb. And it's got a basis of let's say 400 grand and you've been collecting cash flow off the rent for years. Maybe even took some depreciation. The bottom line is you've got this big built-in gain. Now, you own it in your joint revocable living trust through an LLC. Makes sense. That's what I do. Then, of course, averages are, especially with me with my high blood pressure, I'm going to die first. Sorry, Patty, if you're listening. Don't listen. Okay, so I die first. Well, we only get a stepped up basis on half the property. So, if it's worth a million, then only half of it goes up to 500 grand. The other half inherits half of the basis. So, if the basis was 400 grand, now Patty's got a $200,000 basis on a $500,000 piece of it. So, she's got a built-in gain of 300 grand. And you would think, well, she inherited the rental property. She should get a full stepped up basis. No, no, no, no. She only gets it on half the property. So, she goes to sell it, she's got a tax of, with fed and state, could be as high as 30, 35%. So, she's paying tax of 100 grand after I die. And what it could have been planned for in the estate plan.