Mortgage Killer Accelerator

Strategy 41 of 107

Inherited assets: sell after the basis steps up, pay principal

Most predictableFrom an asset you already own

What it is

Property inherited from someone who died generally takes a basis equal to its value on the date of death, so gains before death are not taxed when you sell.

Steps

  1. Property inherited from someone who died generally takes a basis equal to its value on the date of death, so gains before death are not taxed when you sell.
  2. Get a date-of-death appraisal or statement and keep it.
  3. Sell what you do not want to keep and send the proceeds to principal, then ask for a recast.

Repeat: Once, when an estate settles.

Measure: Net sale proceeds (enter as a one-time amount).

Try it in the calculator Enter its amount in "One-time amount to principal". Add a payoff goal of 5 years to see what is still needed.

Risks

  • Inherited retirement accounts do not step up; withdrawals are taxed.
  • Selling a family asset is a family decision.
  • Gains after the date of death are taxed.

Who it fits

Average household, Married couples, Single, Higher net worth, with assets, Grandmas and grandpas (62 and over), No high school diploma, No college degree

Needs

Inherited, or is inheriting, property

How predictable

Most predictable: once in place, the payoff date is arithmetic

A worked example (hypothetical, not guaranteed)

Picture a hypothetical household (average household). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.

They follow the steps: property inherited from someone who died generally takes a basis equal to its value on the date of death, so gains before death are not taxed when you sell.

Suppose it brings a one-time $30,000 on principal. The loan would be paid off in 22 years 10 months instead of 30 years, saving about $134,798 in interest. To finish in five years, they would still need about $3,387 a month more from other strategies. That is why the five-year sequences stack several at once.

The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.

Sequences that use it

  • Estate and giving stack: Turn assets that no longer fit into principal with as little tax as the rules allow, then recast to lower the payment.

Sources and more information

Where to get help

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