What is the step-up in basis at death, and why does it matter for investments?

When someone dies, the assets their heirs inherit get a "stepped-up" cost basis equal to the fair market value on the date of death – wiping out all the capital gains that built up during the original owner's lifetime. If your father bought stock for $20,000 that's worth $200,000 when he passes, your basis resets to $200,000, and you could sell it immediately owing little or no capital gains tax. This is why financial planners often advise holding highly appreciated assets until death rather than selling them, and why it can make sense to spend down or gift other assets first. Note the step-up applies to taxable accounts and property, not to traditional IRAs or 401(k)s, whose withdrawals remain taxable to heirs. It's a cornerstone of estate planning; see wealthserene.com/assessments/estate-readiness.