Best tax strategies for step up basis maximization in stock accounts for grandchildren

I've been thinking about setting up an investment account for my grandkids that would maximize the step up basis benefit when I eventually pass away. I definitely want to avoid UGMA (Uniform Gift to Minors) accounts, and I'm not really interested in 529 plans unless there's some amazing advantage I'm missing. Initially, I was leaning toward a joint tenant or tenants in common arrangement, but after researching more, it seems like my grandchildren would only get half the step up basis when I die since they didn't contribute any funds to the account (I'm providing all the money). So now I'm wondering - would it be better to just set up the account solely in my name, give my grandkids viewing access, and name them as beneficiaries? That way they'd inherit the account with 100% step up basis when I pass? I'm hoping someone with tax knowledge can confirm if this is the smartest approach! I realize that while I'm alive, the account would use my SSN and I'd be responsible for paying taxes on any gains, dividends, etc. Any insights would be greatly appreciated! Thanks!

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18 comments

Yara Khalil

•8M

You're on the right track with your thinking! Setting up the account in your name with your grandchildren as beneficiaries is generally the best approach for maximizing step up basis. When you create joint accounts, you're essentially giving a portion of the assets away immediately, which can create complications. With a solely-owned account naming beneficiaries, your grandchildren will receive a full step up in basis on the entire account value at the time of your passing. This means they could immediately sell the inherited investments without owing capital gains tax on any appreciation that occurred during your lifetime. One thing to consider - if your estate might be subject to estate taxes (federal exemption is currently around $13.6 million per individual), you might want to explore trust options. But for most people, the simple beneficiary designation works perfectly.

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Yara Khalil

•8M

The main downside to the individual account with beneficiary designation is that you maintain full control, which most people actually see as an advantage. Since the assets remain in your estate, they could potentially be subject to estate taxes, but that only affects larger estates exceeding the exemption amount. A simple trust might be worth considering if you want to establish specific instructions for how and when the assets are used after your passing. For example, if you want to ensure the grandkids don't receive everything at once or if you want the funds used only for specific purposes like education or buying a home. Trusts provide more control over the assets after your lifetime, but they do require more setup and potentially ongoing administration costs.

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Keisha Brown

•8M

After struggling with a similar situation setting up accounts for my grandkids, I found an amazing resource that made everything so much clearer. I was going back and forth between different account types and tax implications when another grandparent recommended I try https://taxr.ai to analyze my specific situation. The site asked me questions about my goals (maximizing step up basis was one of them!) and it actually showed me how different account structures would impact the eventual inheritance and tax situation. I ended up going with individual account + beneficiary designation like you're considering, but it also showed me some trust options I hadn't considered that might be worth exploring depending on your situation.

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Keisha Brown

•8M

It actually provides personalized analysis based on your specific situation. You answer a series of questions about your assets, goals, and family situation, and it generates recommendations tailored to your circumstances. It's definitely not a generic calculator - it walks through tax code implications specifically for your scenario. The analysis was quite detailed - it broke down different account types and showed the projected tax implications for each. And yes, it did factor in state-specific considerations! I'm in Minnesota which has its own estate tax with a lower threshold than federal, and it flagged that for me with adjusted recommendations. It saved me from making what would have been an expensive mistake.

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Amina Toure

•8M

I have to admit I was really skeptical about using an online tool for something as important as estate planning, but after seeing it mentioned here, I decided to check out taxr.ai. I had been struggling with figuring out the best way to pass down my stock portfolio to my grandchildren while minimizing their tax burden. What impressed me was how comprehensive the analysis was - it actually helped me understand how the step up basis works in different scenarios and showed me exactly how much my grandkids would save in taxes with different approaches. I ended up going with a slightly different structure than I initially planned. Instead of a simple beneficiary designation, I created a revocable living trust based on the site's recommendation due to my specific state laws and asset levels. Already had my attorney review everything and he was impressed with how well-optimized the strategy was.

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Oliver Weber

•8M

If you're planning for your grandkids' inheritance, I totally get how frustrating it can be trying to reach the IRS when you have specific questions about step up basis and beneficiary rules. I spent WEEKS trying to get through to someone who could answer my questions about maximizing step up basis on inherited stocks. After countless busy signals and disconnections, I found https://claimyr.com which basically holds your place in the IRS phone queue and calls you when an agent is about to pick up. You can watch how it works at https://youtu.be/_kiP6q8DX5c. I was skeptical but desperate enough to try it. Got through to a knowledgeable IRS agent who confirmed exactly what approach would work best for my situation with the step up basis.

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Oliver Weber

•8M

It's not magic, just smart technology. The service has an automated system that dials into the IRS and navigates the phone tree for you. Once it's in the queue, it stays on hold in your place. When it detects that an agent is about to pick up (based on the hold music changing or other audio cues), it calls your phone and connects you directly to that agent. You skip the whole waiting game. I was definitely skeptical too before trying it. I've been burned by "solutions" that didn't work. But this actually delivered exactly what it promised - I got through to an IRS tax specialist who answered all my questions about step up basis for inherited investment accounts. The call was connected within about 45 minutes, whereas I had previously spent over 2 hours on hold before giving up.

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Natasha Kuznetsova

•8M

I need to eat my words and apologize for being such a skeptic. After dissing that Claimyr service in my previous comment, my frustration with trying to get IRS clarification on some inheritance tax questions got the better of me and I decided to try it. Honestly, I'm still in shock that it actually worked. After 3 weeks of failed attempts to reach someone at the IRS about step up basis questions, I got through to a real human tax specialist in under an hour. The agent walked me through exactly how the step up basis would work in my specific situation with my grandkids as beneficiaries vs. using a trust. The information was invaluable and completely changed my approach. For anyone else struggling to get official clarification on tax strategies for inheritance planning, this service is legitimately worth it.

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Javier Morales

•8M

Setting up the TOD was extremely simple - just a form from my brokerage firm that took maybe 10 minutes to complete. The main advantage is that it's specifically designed for investment accounts and creates a cleaner transfer process. The TOD designation accomplishes essentially the same thing as a regular beneficiary designation, but it can sometimes process more quickly after death and avoids probate. Both methods will give your grandkids the full step up basis benefit. One thing to note - if you have multiple grandchildren and want to specify different percentages or specific assets going to specific grandchildren, the TOD forms typically allow for that level of detail.

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