I was recently asked the following question:
A person (Grantor) puts real property valued at $100,000 into a Pure Grantor Irrevocable Trust, and the property increases in value to $1,000,000. After the death of the Grantor, the Beneficiaries decide to sell the property and distribute the cash from the sale of the property. Who pays the tax on the capital gain?
The answer is no one. At the time of the death of the Grantor, the Beneficiaries receive a step-up in basis as they would if the property remained in the name of the Grantor rather than the Trust.
This is one of the great benefits of a Pure Grantor Irrevocable Trust.