Tips To Reduce Estate Taxes with Stepped-Up Basis in Oklahoma

You can effectively reduce Estate Taxes by focusing on eliminating or lowering capital gains tax through a stepped-up basis. When it comes to protecting your legacy in Oklahoma, understanding the “stepped-up basis” (or step-up in value) is one of the most powerful tools in your kit. While many people focus solely on the 40% federal estate tax, the step-up in basis is actually a strategy to defeat a different tax: Capital Gains Tax.

As of 2026, with the federal estate tax exemption reaching $15 million per person (thanks to the One Big Beautiful Bill Act), fewer Oklahomans will face the “death tax.” However, almost every heir who sells an inherited asset will face capital gains taxes—unless you plan for the step-up and how it helps reduce estate taxes.

What is a “Step-Up in Basis”?

The “basis” of an asset is generally what you paid for it. If you bought a ranch in Rogers County for $100,000 thirty years ago and it’s now worth $1 million, your basis is $100,000. If you sell it today, you owe taxes on that $900,000 gain.

However, if you pass that ranch to your children through your estate, the IRS “steps up” the basis to the fair market value on the date of your death.

• Your Basis: $100,000
• Heirs’ New Basis: $1,000,000
• Taxable Gain if sold immediately: $0

Strategies to Maximize the Step-Up in Oklahoma

1. Don’t Gift Highly Appreciated Assets While Living

A common mistake is “gifting” a home or stocks to children while you are still alive to “get it out of your name.” When you give a gift during your lifetime, the recipient receives your original cost basis (carryover basis).

The Lesson: If you gift that $1M ranch today, your kids inherit your $100k basis. If they sell it, they’ll owe capital gains tax on $900k. If they inherit it after you pass, they could save six figures in taxes.

2. The “Double Step-Up” for Married Couples

In Oklahoma (a common law state), joint property typically only gets a “half step-up” when the first spouse dies. For example, if a couple owns a $500k home and one spouse passes, only the deceased spouse’s 50% share gets stepped up.

• Pro Tip: Advanced planning using a Joint Revocable Trust or a QTIP Trust can sometimes be used to achieve a “double step-up”—once when the first spouse passes and again when the second spouse passes—potentially wiping out capital gains on the entire property twice.

3. Using “Swap Powers” in Irrevocable Trusts

If you have assets in an irrevocable trust (like a SLAT or an IDGT) to avoid estate taxes, those assets typically do not get a step-up in basis because they aren’t technically in your estate.

• The Strategy: Many well-drafted trusts include a “swap power.” This allows you to “swap” low-basis assets (like old stock) inside the trust for high-basis assets (like cash) of equal value from your personal holdings. By bringing the low-basis assets back into your name before you pass, you secure the step-up for your heirs.

Summary: Estate Tax vs. Capital Gains

In 2026, the goal for most Oklahomans isn’t just avoiding the federal estate tax—it’s maximizing the step-up in value. If your estate is under $15 million, your primary “tax enemy” is likely capital gains. By holding onto appreciated assets rather than gifting them, you ensure your family keeps more of what you built.

Estate Planning In Tulsa You Can Count On

Most people try to Reduce Estate Taxes by lowering the capital gains they pay on inherited gifts. By using a strategy that focuses on capital gains reductions and the stepped-up value, you can effectively reduce the tax your heirs pay on your death. For a free consultation with a Tulsa estate planning attorney at Kania Law Office, call today 918.743.2233. You can also request a free online consultation by following this link.