Estate Planning and the 1031 Exchange: The Power of Step-Up in Basis

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20 Aug, 2026
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A 1031 exchange is famously known for deferring taxes during an investor’s lifetime, but its true power shines in estate planning. The ultimate 1031 exchange strategy is often summarized as: “Swap ’til you drop.”

When you defer capital gains taxes through successive 1031 exchanges, your tax liability rolls over into each new property. However, under current tax law, when you pass away and leave those real estate assets to your heirs, the property receives a “step-up in basis.”

This means the inherited property’s tax basis is adjusted to its current fair market value. All the capital gains taxes you deferred over your lifetime are effectively wiped out. Your heirs can then sell the property immediately with little to no capital gains tax. At Customized 1031, we work alongside your legal and tax advisors to ensure your real estate investments are structured to leave a lasting, tax-efficient legacy for your family.