The wealthiest families don't use the step-up in basis.
Or at least not as their primary strategy.
In 2026, individuals can pass $15M to heirs free of federal estate tax. Anything over that is subject to a 40% federal estate tax.
For very wealthy families, avoiding that 40% becomes the priority over the 20% long-term capital gains tax.
The business owner is a perfect example. As a business grows in value, it becomes more expensive from a tax perspective to transfer wealth to future generations.
The most common solution is to transfer business interests into a GST-exempt dynasty trust. This removes the assets from the taxable estate and locks in today's lower values for transfer tax purposes.
The trust can also be structured as a Spousal Lifetime Access Trust (SLAT), naming the spouse and children as current beneficiaries. That means the assets remain accessible to the current generation while being positioned to pass to descendants without additional transfer taxes.
This shifts value to future generations while keeping it available today, which is an incredibly powerful combination.
Over a 50-year period, the numbers speak for themselves. A business owner who gifts $15M into a GST-exempt dynasty trust could end up with ~ 2.7x as much wealth available to descendants compared to no trust at all $224M vs. $83M.
That’s why taxes are the #1 focus of wealthy families.
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Scenario as of 2026: A business with zero basis valued at $15 million is transferred to a GST-exempt grantor trust. After five years, the business is sold for $25 million, and the grantor pays the 20-percent capital gains tax due on the gain from the sale, allowing the trust assets to grow without a tax drag. The assets appreciate at 5 percent each year after any spending. The grantor continues to pay all income taxes. The final values assume that assets not in the GST trust would be subject to 40-percent estate tax both at the grantor’s death in 25 years and again at the grantor’s sole child’s death, assuming that happens in 50 years. This is just an example; other factors can affect the outcome.