Illinois Joint Tenancy and Income Taxes

When real estate is held by two individuals as joint tenants with rights of survivorship, the surviving joint tenant will not receive the full step-up in cost basis he would have received if he had inherited the real estate.

For example, Sue and her son, Sam, purchased a house as joint tenants twenty years ago for $50,000 and today it is worth $550,000. After Sue dies, only half of the real estate receives a step up in cost basis for tax purposes. If Sam sells the property for $550,000, Sam has a $250,000 gain on the sale which is subject to capital gains tax.

If Sue had kept title to the real estate in her name alone and left the real estate to Sam in her Will or in her revocable living trust, upon Sue’s death the real estate would receive the full step up in cost basis. Sam would have no gain on the sale subject to capital gains tax.

Consult your estate planning attorney for further information.

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