Do This Now to Avoid Massive Capital Gains Tax on Your Family's Inheritance | Repair The Roof Podcast

Subscribe where ever you listen to Podcasts:

Spotify Podcasts
Apple Podcasts
Google Podcasts

Resources:

Ted Gudorf, a certified estate planning attorney, highlights the crucial role of capital gains tax planning in protecting family wealth. He explains key concepts such as unrealized capital gains, the stepped-up basis rule, and advanced strategies like charitable remainder trusts and installment sales. Gudorf stresses that proper timing and a comprehensive estate plan are essential to reduce tax burdens and secure a lasting financial legacy.

Do This Now to Avoid Massive Capital Gains Tax on Your Family's Inheritance

Imagine working your whole life, carefully building wealth through your business, investments, or property—only for the IRS to take a massive bite out of it when you pass it on. Most families don’t realize it, but capital gains taxes can quietly erode a huge portion of their inheritance.

Here’s the shocking truth: without the right planning, your loved ones could lose tens of thousands—or even hundreds of thousands—of dollars to taxes that could have been completely avoided.

The good news? There are entirely legal, proven strategies that allow you to eliminate capital gains tax and pass more wealth directly to your children and grandchildren.

This isn’t about loopholes. It’s about using the law as it was written to protect your legacy.

Key Takeaways:

  • Capital gains taxes can significantly impact family inheritances.
  • Proper planning can legally eliminate capital gains taxes.
  • The stepped-up basis rule allows heirs to inherit assets at current value.
  • Holding onto appreciated assets until death can save taxes.
  • Charitable remainder trusts can provide income while avoiding capital gains taxes.
  • Installment sales can spread capital gains tax over multiple years.
  • Opportunity zones can defer and reduce capital gains taxes.
  • Timing is critical for implementing tax strategies effectively.
  • Comprehensive estate planning is essential for preserving wealth.
  • Working with professionals is crucial to navigate complex tax laws.

Why Capital Gains Taxes Are a Silent Threat

When you own assets like stocks, real estate, or a family business, their value often grows dramatically over time. The difference between what you paid for them and what they’re worth today is called unrealized capital gains.

While those gains may look great on paper, they become a serious problem when:

  • You sell the asset during your lifetime

  • Your heirs sell after inheriting it

Without proper planning, those gains can be taxed heavily, eating into what your family actually receives.

One real example: farmland purchased for $50,000 in the 1970s later valued at $800,000. Without planning, the heirs faced a tax bill of more than $150,000. With the right strategy? They paid nothing.

Strategy #1: The Stepped-Up Basis Rule

The most powerful tool available for families is the stepped-up basis. Here’s how it works:

  • When you pass away, your heirs inherit assets at their current fair market value, not the original purchase price.

  • This wipes out the lifetime capital gains for tax purposes.

  • If your heirs sell immediately, they could owe zero capital gains tax.

Example: You bought stock for $10,000 that’s now worth $100,000. If you sell today, you’d owe tax on $90,000. But if your children inherit and sell, the gain disappears.

For couples, there’s an even bigger opportunity: the double stepped-up basis. First, when one spouse dies, the survivor may receive a step-up. Then when the second spouse passes, heirs receive another step-up—potentially eliminating decades of gains.

This simple shift in ownership planning can save families extraordinary amounts in taxes.

Strategy #2: Charitable Remainder Trusts (CRTs)

Sometimes, you can’t wait until death to sell. You may need income now or want to diversify. That’s where CRTs come in:

  • You transfer appreciated assets into a charitable trust.

  • The trust sells them tax-free and reinvests the full value.

  • You receive income for life (often 5–7% annually).

  • At your passing, the remainder goes to charity.

Result? You avoid the upfront capital gains hit, secure steady income, and may even qualify for a charitable deduction.

Strategy #3: Installment Sales

If you’re selling real estate or a business, why take all the gains in one year and push yourself into the highest tax brackets? Instead, use an installment sale:

  • Spread payments over time.

  • Spread taxes over time.

  • Keep yourself in lower brackets, reducing overall tax burden.

It’s a simple but often overlooked way to control how much of your gain gets taxed at once.

Strategy #4: Advanced Planning Tools

For families with larger estates, more sophisticated strategies can unlock even greater tax savings:

  • Grantor Trusts – Shift future appreciation out of your estate while you pay the taxes, effectively making additional tax-free gifts.

  • Charitable Lead Trusts – Reduce estate and gift taxes while still benefiting your heirs.

  • Opportunity Zone Investments – Defer or eliminate capital gains by reinvesting within 180 days.

  • Qualified Small Business Stock (Section 1202) – Potentially exclude up to $10 million per person in capital gains.

Each of these tools requires careful planning and strict adherence to IRS rules, but when implemented correctly, they can protect massive amounts of wealth.

Timing Is Everything

One of the most common mistakes families make is waiting too long. Many of these strategies only work before a sale happens or while the owner is still alive.

  • Stepped-up basis only applies if assets are held until death.

  • Charitable trusts must be created before the sale.

  • Opportunity Zone investments require reinvestment within 180 days.

Once you sell without a plan, it’s too late. That’s why planning early—and reviewing often—is essential.

Why This Matters Beyond Taxes

Yes, the strategies above can save your family enormous amounts of money. But this isn’t just about taxes. It’s about preserving your legacy, protecting your life’s work, and ensuring your family keeps the resources you intended for them—not the government.

Every dollar saved from unnecessary taxes is another dollar that funds your children’s future, supports your grandchildren’s education, or strengthens your family business.

Estate planning isn’t just legal paperwork—it’s the foundation for passing on your values and vision along with your assets.

Your Next Step

Capital gains tax planning is complex, and mistakes can be costly. But with the right strategies, you can legally protect your wealth and dramatically increase what your family receives.

The key is to take action now—before a sale, before assets change hands, before it’s too late.

If you’re ready to explore how these strategies fit into your estate plan, don’t wait. Talk to an experienced estate planning attorney who can guide you through the options and help you protect what matters most.

Conclusion

Capital gains taxes don’t have to be a family’s inheritance nightmare. With tools like the stepped-up basis, charitable trusts, installment sales, and advanced planning strategies, you can eliminate or drastically reduce the tax burden.

The rules are complex, but the opportunities are powerful. Done right, you’ll not only preserve your wealth—you’ll ensure it supports your family for generations to come.

Don’t let taxes write your family’s financial story. Take control now.

Transcript: Prefer to Read — Click to Open

Ted Gudorf (09:08.834)

Are you worried that capital gains taxes could wipe out a huge chunk of your family’s inheritance? What if I told you there’s a completely legal way to eliminate these taxes and pass more wealth to your children and grandchildren? Most families don’t realize they’re sitting on a tax time bomb that could cost them tens of thousands, even hundreds of thousands of dollars when they pass away. But here’s the thing.

Ted Gudorf (09:33.144)

With the right planning strategies, you can legally avoid these taxes and preserve your legacy for future generations. Hi, I’m Ted Gudorf a certified estate planning attorney who’s helped hundreds of families protect their wealth from unnecessary taxes. Over my 38 plus years of practice, I’ve seen too many families lose substantial portions of their inheritance to capital gains taxes simply because they didn’t know these strategies existed. Today,

Ted Gudorf (10:02.03)

I want to walk you through the most powerful legal methods to eliminate capital gains taxes and ensure your family keeps more of what you’ve worked so hard to build. By the end of this video, you’ll understand exactly how to use these strategies to protect your inheritance and why timing is absolutely critical. Let me start by explaining what capital gains tax really means for your estate. When you own assets like stocks, real estate, or business interests,

Ted Gudorf (10:31.554)

that have grown in value over time, you have what’s called unrealized capital gains. These are the profits that exist on paper but haven’t been taxed yet because you haven’t sold the assets. The problem comes when you pass away or when your heirs eventually sell these assets. Without proper planning, your family could face massive tax bills that could have been completely avoided. Here’s a real example from my practice.

Ted Gudorf (11:01.39)

I had a client whose parents bought farmland in the 1970s for roughly $50,000. When they passed away, that same land was worth $800,000. That’s $750,000 in capital gains. If their children had to sell that land without proper planning, they would have to face capital gains taxes on the entire gain, potentially costing them over $150,000 in federal taxes alone.

Ted Gudorf (11:31.224)

But because we implemented the right strategy, their family paid zero capital gains tax. That’s right, zero. So the first strategy you need to understand is called the stepped up basis rule. It’s one of the most powerful tax benefits in our system. When you inherit assets, the tax basis of those assets gets stepped up to their fair market value on the date of death. This means all the capital gains that built up

Ted Gudorf (12:01.154)

during the original owner’s lifetime are completely wiped out for tax purposes so long as the asset is still in the decedent’s taxable estate. Your heirs inherit the assets at their current value, not what you originally paid for them, as long as it’s part of your taxable estate. Let me break this down with a simple example.

Ted Gudorf (12:28.814)

Say you bought stock for $10,000 20 years ago, and now it’s worth over $100,000. If you sold it today, you’d pay capital gains tax on $90,000 of gain. But if you hold on to that stock until you pass away and it becomes part of your taxable estate, your children inherit it with a stepped up basis equal to $100,000, they could sell it immediately.

Ted Gudorf (12:57.848)

for that $100,000 and pay zero capital gains tax, then $90,000 in gain just disappears from a tax perspective. This is why one of the most important pieces of advice I give clients is this. If you have highly appreciated assets and you don’t need the money right now, don’t sell them and don’t gift them. Hold on to them and let your heirs benefit.

Ted Gudorf (13:27.074)

from the stepped-up basis. This simple strategy alone can save families enormous amounts in taxes. But here’s where it gets even more powerful. For married couples, there’s something called a double stepped-up basis that can provide even greater benefits. When the first spouse dies, the surviving spouse can receive a stepped-up basis on their share of community property

Ted Gudorf (13:57.11)

Then, when the surviving spouse passes away, the heirs can get another stepped up basis. This can eliminate capital gains on assets that have appreciated over decades. However, there’s a critical planning opportunity that many families miss. In some cases, it might make sense to convert separate property into community property to take advantage of these rules.

Ted Gudorf (14:23.96)

This is where strategies like community property trusts come into play, even for residents of non-community property states like the state of Ohio. Now, let’s talk about what happens when you can’t wait for the stepped up basis. Sometimes you need to sell appreciated assets during your lifetime, whether it be for retirement income or long-term care needs or other financial goals.

Ted Gudorf (14:50.144)

In these situations, there are still powerful strategies to minimize or eliminate capital gains taxes. One of my favorite strategies is the charitable remainder trust. This allows you to transfer highly appreciated assets to a charitable trust, sell the assets without paying immediate capital gains tax, and receive an income for life. When you pass away, the remaining assets go to the charity, but you’ve already received substantial income.

Ted Gudorf (15:18.88)

and you’ve eliminated the capital gains tax.

Ted Gudorf (15:28.366)

Plus, you may get a charitable deduction when you set up the trust. Here’s how it works in practice. Let’s say you have stock worth $500,000 that you bought for $100,000. Instead of selling it and paying capital gains tax on all the gain, you transfer the stock to a charitable remainder trust. The trust sells the stock tax free and invests the full $500,000. You receive income payments for life.

Ted Gudorf (15:57.496)

typically 5 to 7 % annually. Your family doesn’t inherit this particular asset, but they also don’t inherit the tax burden. And you’ve received substantial income during your lifetime. Another powerful strategy is the installment sale, particularly useful for business owners or real estate investors. Instead of receiving the full sales price upfront in year one and paying all of the capital gains tax in one year,

Ted Gudorf (16:27.51)

You can structure the sale to receive payments over several years. This spreads the capital gains tax over multiple years, potentially keeping you in a much lower tax bracket and reducing the overall tax burden. For families with significant wealth, there are even more sophisticated strategies. A grant or trust can be used to transfer future appreciation out of your estate while you pay the income taxes on trust earnings.

Ted Gudorf (16:54.274)

This effectively allows you to make additional tax-free gifts to your beneficiaries. Charitable Lead Trust can provide substantial estate and gift tax benefits while ultimately passing assets to your heirs with reduced transfer costs. One strategy that’s particularly relevant for Ohio residents is the use of opportunity zones. If you have capital gains from the sale of any asset, you can defer and potentially reduce those taxes

Ted Gudorf (17:22.178)

by investing in qualified Opportunity Zone funds. Depending upon how long you hold the investment, you could eliminate 10 to 15 % of the original gain. And any appreciation in the Opportunity Zone investment itself can be completely tax-free if it’s held for at least 10 years. But here’s what many people don’t realize. Timing is absolutely critical with all of these strategies. The stepped-up basis only works if you actually hold the assets until death.

Ted Gudorf (17:51.374)

Shareholder remainder trusts need to be established before you sell the appreciated assets. Opportunity zone investments must be made within 180 days of the sale that created the capital gain. This is why it’s so important to plan ahead and not wait until you’re facing an immediate need to sell. I’ve had clients come to me after they’ve already sold appreciated assets, and unfortunately, it’s too late to implement many of these strategies.

Ted Gudorf (18:19.564)

The time to plan is now while you still have options. There’s also an important consideration for retirement accounts. While retirement accounts don’t get a stepped up basis, there are strategies to minimize the tax impact on your heirs. Roth conversions during your lifetime can eliminate future income taxes for your beneficiaries. For business owners, there are additional strategies to consider. For instance,

Ted Gudorf (18:49.204)

Section 1202, Qualified Small Business Stock, can provide up to $10 million of capital gains exclusion per person. This means married couples could potentially exclude up to $20 million of capital gains from federal taxes. But the stock must meet specific requirements, and it must be held for at least five years. State planning isn’t just about avoiding taxes.

Ted Gudorf (19:18.228)

It’s about preserving your legacy and ensuring your family has the resources they need. But why pay unnecessary taxes when legal strategies exist to minimize or eliminate them? Every dollar you save in taxes is another dollar that stays in your family. The key is to work with professionals who understand both the tax implications and the estate planning strategies available. This isn’t something you want to try to figure out on your own.

Ted Gudorf (19:47.34)

The rules are complex and the stakes are too high to make mistakes. Remember, these strategies work best when implemented as part of a comprehensive estate plan. You need to consider not just capital gains taxes, but also estate taxes, income taxes, and the overall structure of how assets will pass through your heirs. Everything needs to work together like a hand in a glove to achieve your goals.

Ted Gudorf (20:16.95)

Now that you understand these powerful strategies to avoid capital gains taxes, you want to make sure your overall estate plan is properly structured to take advantage of them. If you’re ready to learn about the essential legal documents that make all of this possible, click right here to watch my video on the three critical documents you need to ensure your medical wishes are followed. Because protecting your wealth means nothing.

Ted Gudorf (20:45.686)

if you don’t have the right legal framework in place.

Back to All Episodes