Yes except if community property state see below.
Assets jointly-owned by Husband and Wife. The basis adjustment rules for property owned jointly by a
married couple will be different for Common Law and Community/Marital Property states.
Currently the community property states are:
- Arizona
- California
- Idaho
- Louisiana
- Nevada
- New Mexico
- Texas
- Washington
- Wisconsin
The rest of the states are Common Law States. Assets owned jointly by Husband and Wife in all common law states are deemed Qualified Joint Interests and only one-half of the assets receive a basis adjustment on the first spouse’s death (regardless of which spouse contributed the original property to the joint account).
Here are other things to look at:
Transfer on Death (TOD) Accounts. All of the assets held in a TOD account receive a new basis at the
account owner’s death. (Ideally, the assets will be registered in a new account in the name of the designated
beneficiaries before any securities are sold.)
The basis of property “acquired from a decedent” is adjusted to the “fair market value” of that property at the date of death (unless one of the exceptions outlined below applies). Basis adjustments at death, whether up or down, are required, not optional.
Considerations
A decedent died owning the following: (1) an individual brokerage account, (2) a brokerage
account held in a Revocable Living Trust, (3) several securities held in certificate form, and (4) a personal
residence titled in his individual name. All of the assets described above receive a new basis equal to their
date of death values.
In addition to the facts described above , the decedent died possessing an income
interest for life (a life estate) in a trust created under his mother’s estate at her earlier death. The trust
remainder passes equally to the decedent’s children. The basis of these trust assets do not get adjusted
because they do not pass “from the decedent.” The property really passed from the decedent’s mother and
while the basis should have been adjusted at her death, it is not adjusted again at her daughter’s death.
Types of Securities. The rules for adjusting the basis of assets acquired from a decedent are slightly different
for different types of securities.
Stocks and bonds. Stocks are adjusted to the mean (average) between the high and low trading prices on
the date of death.
Thus if the high is 34 and the low is 33 the date of death value is 33.50.
Weekends and Holidays. When the date of death falls on a weekend or holiday, the basis of stocks and
bonds is adjusted to the average of the mean between the high and low trading prices on the days
immediately before, and immediately after, the weekend or holiday.
Mutual Funds. Since there are no intra-day quotes for mutual funds, the basis of mutual funds is adjusted to
the closing selling price on the valuation date.
Weekends and Holidays. When the date of death falls on a weekend or holiday, the basis of a mutual
fund is adjusted to the closing price on the first trading day preceding the date of death.
Exceptions to the General Rule. There are several exceptions to the general rule that assets acquired from a
decedent are adjusted to the date of death value. They include:
Alternate Valuation. If “Alternate Valuation” is elected by the executor or personal representative, the same
rules outlined above are applicable, but they are applied with respect to the high-low trading prices as of the
date that is six months after the date of death.
Election must reduce federal estate taxes. Alternate valuation can only be elected where the gross
estate and the federal estate tax are both reduced as a result of the election. In other words, this election
is not available for smaller estates that are not large enough to be subject to federal estate tax (i.e.,
estates that are below the current $11,400,000 federal estate tax exemption amount). Similarly, estates
of decedents survived by a spouse will often not qualify for alternate valuation because estate plans of
married couples will generally be designed to defer all estate taxes until the death of the surviving
spouse.
I hope that helps.
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