New revenue ruling on irrevocable trusts and why it doesn’t mean anything new.

There has been a lot of buzz in the estate planning news world about a catastrophic revenue ruling by the IRS. Professional journals and news outlets are screaming about how the IRS is quietly taking away your precious tax breaks when it comes to irrevocable trusts. Clients, financial advisors, and even other attorneys are concerned about losing tax breaks, and wondering whether they need to start completely restructuring the way they do estate planning.

Unfortunately, this is nothing more than ordinarily solid, reliable, and dry publications succumbing to the temptation to post clickbait.

Yes, the IRS published Revenue Ruling 2023-2, which discussed how assets held in most irrevocable trusts do not get a “stepped up cost basis” when the person who put the assets into the trust died. The thing is, this is the way it has been since Reagan was still in the Oval Office and the Revenue Ruling is just stating what should have been obvious. Here is the very basic overview:

That’s it. The simple rule is you only get the stepped-up cost basis if something is part of your taxable estate when you die. If you are putting assets into an irrevocable trust to get it out of your estate for estate taxes, then it doesn’t get this favorable post-death treatment for capital gains taxes.

Then why is the Internet buzzing about this seismic shift in tax policy that isn’t anything new? Clickbait. Plain and simple, it is just clickbait and people are falling for it. It seems that these days of “number seven on the list will shock you” and “you’ll never believe this is true,” even online publications thought of as having high standards of truth and integrity are also chasing clicks, likes, and shares.

For more on the revenue ruling, check out the YouTube video here:

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