There is a wrinkle in the federal tax code that can help heirs avoid or reduce taxes on inherited assets, which is known as “step-up in basis”. A capital gain happens when you sell an asset for more than what it initially cost. A step-up in basis takes into consideration the fair market value of an asset when it was inherited rather than when it was acquired. This means there’s a “step-up” from the original value to the current market value. Conversely, if someone gives a gift to somebody during their lifetime, the recipient retains the basis of the person who made the gift, which is known as a “carryover basis.” Click below for more detail including some examples.
https://www.forbes.com/advisor/investing/what-is-step-up-in-basis/