cost basis

[demitx475]

 @Anonymous_

Thank you so much!!

[NCperson]

@demitx475 - that is why I asked to experts to re-clarify the answer as the order of events matters.

Their point is that once the asset is in the Irrevocable trust, it is not eligible for 'step up'. 

But of course for your father, he passed before the property was placed in an irrevocable trust, so it was eligible for the step up.   

So your dad's half was eligible for the step-up, but when you mom passes, the property will not be eligible for the step-up. 

[Anonymous_]

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@NCperson wrote:

Their point is that once the asset is in the Irrevocable trust, it is not eligible for 'step up'. 

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Merely transferring assets to an irrevocable trust does not necessarily move them out of the grantor's estate and the assets need to be in the grantor's estate at death for there to be a step up in basis; there is no step up when the transfer to the trust is considered to be a completed inter vivos gift.

The entire rationale behind an IDGT is to move the assets out of the grantor's estate but still have any income tax liability borne by the grantor. There is no step up in basis at the death of the grantor with an IDGT because the transfer of assets is a completed gift (to the beneficiary(ies)).