Clear Money Guide
Guide and tool overview
See the questions covered here, then open the interactive utility.
Updated August 1, 2026. Quick answer: putting your house in an irrevocable trust can protect it — and if the trust is built so the house leaves your taxable estate, it also throws away the step-up in basis. The IRS said so directly in Rev. Rul. 2023-2: where a grantor funds an irrevocable trust by completed gift and the assets are not includible in the gross estate, “the basis of Asset immediately after A’s death is the same as the basis of Asset immediately prior to A’s death.” Your heirs inherit your old basis and pay capital gains on decades of appreciation. Nobody puts a dollar figure on that. This does:
What losing the step-up actually costs you
The ruling, in its own words
Rev. Rul. 2023-2 frames the question exactly as a homeowner would, if homeowners wrote like the IRS:
“Is there a basis adjustment under §1014 of the Internal Revenue Code to the assets of a trust on the death of the individual who is the owner of the trust under chapter 1 of the Code if the trust assets are not includible in the owner’s gross estate pursuant to chapter 11 of the Code?”
The answer is no. The holding turns on a technical point with a very practical consequence: §1014(b) lists the seven kinds of property treated as “acquired from a decedent”, and that list is exclusive. Property given away in a completed gift during life is not on it:
“If A funds T with Asset in a transaction that is a completed gift for gift tax purposes, the basis of Asset is not adjusted to its fair market value on the date of A’s death under §1014 because Asset was not acquired or passed from a decedent as defined in §1014(b).”
Note what does not save you: being a grantor trust for income tax purposes. Many irrevocable trusts are deliberately drafted so the grantor keeps paying the income tax — that is usually a feature. It has no bearing here. Income-tax ownership under chapter 1 and estate inclusion under chapter 11 are separate questions, and only the second one moves basis.
The question that decides your answer
Everything hinges on whether the trust assets are includible in your gross estate. The ruling’s facts are explicit that they were not. Plenty of irrevocable trusts are drafted the other way — keeping the assets in the taxable estate on purpose, precisely so the step-up survives — and for those, the ruling simply does not apply. So the useful question for your attorney is not “is my trust irrevocable?” but “are the assets includible in my gross estate, and under which Code section?” Ask it in writing.
The trade-off is real in both directions. An asset kept in your estate keeps the step-up and stays exposed to whatever the trust was meant to protect against. An asset moved out is protected and carries its old basis forever. There is no version where you get both, and the calculator above prices the side you are choosing.
Where this sits next to the rest of the picture
If the reason you are considering this is long-term care, start with whether Medicaid can actually take your house — that page covers the lookback and what a properly built trust does and does not protect, and it is the prior question. For how a trust’s own gains are taxed while you are alive, see when capital gains stay in the trust. The basis rules themselves have edges worth knowing: a step-up can also be a step-down, retirement accounts never get one at all, and married couples in community-property states get a double step-up that changes this maths entirely. General overview of trust taxation: our trusts guide.