Estate & Generational Wealth Transfer
Step-up in basis at death, gifting limits, Roth conversion ladders, and inherited IRA rules
In 1990, a father bought 1,000 shares of Microsoft at $0.97 per share — a $970 investment. He held them his entire life.
By the time he passed in 2024, those shares (after splits) were worth approximately $420 per share — a total value of $420,000. The unrealized gain: $419,030. Had he sold the day before death, the capital gains tax at 20% plus 3.
8% NIIT would have been $99,649. Instead, his daughter inherited the shares with a stepped-up basis of $420,000 — the value at the date of death. She can sell immediately and owe zero capital gains tax.
$99,649 in tax, legally erased by holding until death. This is the most powerful provision in the U.S.
tax code for long-term investors. When you die, your heirs receive your appreciated assets at their fair market value on the date of death — not your original purchase price.
That is the opening. Finishing a lesson is where it stops being interesting and starts being useful: the full lesson runs to 5 sections and ends with 5 practice questions. A free account is what opens the rest, and the other 255 lessons in the Academy with it. No card.
What this lesson covers
- 1Step-up in basis at death (IRC Section 1014)
- 22025 estate and gift tax thresholds
- 3The annual gift exclusion strategy
- 4The Roth conversion ladder — early retirement's tax-free withdrawal engine
- 5Inherited IRA rules (post-SECURE Act)