Even if the estate tax does not affect you, the step-up in basis on inherited assets, which was made permanent by the 2012 tax law, could be important to you and your heirs. Consider this example. Thank You, Uncle Pete Your Uncle Pete bought stock for $2,000 and left you the shares when he passed away, at which time they had appreciated in value to $10,000. At this point, your basis in the shares is stepped up to $10,000. If you later sell the stock for $12,000, you would owe capital gains tax only on the $2,000 of appreciation since you inherited them, rather than on the $10,000 of appreciation since Uncle Pete bought them. This same approach applies to many other types of assets, including real estate. If you inherit a house, the basis would typically be the fair market value of the property at the time of the owner’s death. Adjustments may be required for any depreciation taken for tax purposes. Stepping Up Your Assets NOTE: The step-up in basis does not apply to certain inherited assets such as cash, variable annuities, and retirement accounts.