INVESTOR'S GUIDE
1031 EXCHANGES AND ESTATE PLANNING
How real estate investors can defer capital gains today, and let the step-up in basis eliminate that tax bill for their heirs entirely.
INVESTOR'S GUIDEBOOK
Two well-known tools.
Rarely explained together.
Almost every long-term real estate investor eventually asks the same question: what happens to these properties when I'm gone?
This guide walks through how the 1031 Exchange and the step-up in basis at death work together: deferring capital gains during your lifetime, then eliminating them entirely for your heirs, while leaving behind something far easier to divide fairly than a building with three names on the deed.
- How the step-up in basis under IRC Section 1014 erases decades of built-in gain
- The current 2026 federal and state estate tax landscape, post-One Big Beautiful Bill Act (OBBBA)
- Why Delaware Statutory Trusts are built to simplify inheritance among multiple heirs
- How to structure trusts, partnerships, and titling for a clean exchange
- A family roadmap and step-by-step plan from assessment to transfer
WHAT THE STEP-UP IS ACTUALLY WORTH
One estate. Two very different outcomes.
A hypothetical scenario from inside the guide: an investor's $4.5M portfolio, with a combined basis of $900,000, sold during life versus passed to heirs at death.
SOLD DURING LIFETIME
$3.6M
taxable built-in gain, owed on sale
HELD UNTIL DEATH
$0
taxable gain for heirs, after the step-up in basis
$3.6M in gain eliminated, not deferred the same portfolio, one different decision
Hypothetical example for illustrative purposes only; it does not represent an actual or specific investment or estate. Actual figures depend on individual tax and estate circumstances and are never guaranteed. Consult your tax and legal advisors. Full math is in Section Two of the guide.
INSIDE THE GUIDE
From deferral to distribution
Written to be read start to finish, or used as a reference while you're building the plan with your own attorney and CPA.
Why Real Estate Needs Its Own Estate Plan
Why selling triggers the tax the step-up would erase, and why leaving property to heirs who don't want to co-own it creates its own kind of cost.
The Step-Up in Basis, Explained
How IRC Section 1014 resets an heir's cost basis to fair market value at death, the "swap till you drop" strategy, and the double step-up for married couples.
The 2026 Estate Tax Landscape
The post-OBBBA federal exemption, GST exemption, gift exclusion, and the state-level estate taxes that don't go away even when federal exposure does.
Why DSTs Are Built for This Moment
How fractional DST interests let each heir choose their own path, without transferring landlord duties to children who never wanted them.
Structuring the Exchange for a Smooth Transfer
The "same taxpayer" rule, revocable trusts, the partnership trap, and why the team around you matters before a property is ever under contract.
A Family's Roadmap
A step-by-step illustration of how one family assessed, exchanged, allocated, and communicated their plan before it was ever needed.
Common Mistakes to Avoid
The six most frequent missteps investors make with 1031s and estate plans, and how to avoid each one.
The KNPRE Roadmap
The six-step sequence, from assembling your team to reviewing the plan regularly, that applies to nearly every family's situation.
FREE DOWNLOAD
Get the guide before you build the plan
Whether you're just starting to think about legacy or ready to restructure a portfolio built over decades, this is the reference to bring to your attorney and CPA.
+1 (212) 575-2152 · invest@knpre.com · New York | Los Angeles
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The contents of this communication: (i) do not constitute an offer of securities or a solicitation of an offer to buy securities, (ii) offers can be made only by the confidential Private Placement Memorandum (the “PPM”) which is available upon request, (iii) do not and cannot replace the PPM and is qualified in its entirety by the PPM, and (iv) may not be relied upon in making an investment decision related to any investment offering by the issuer, or any affiliate, or partner thereof ("Issuer"). All potential investors must read the PPM and no person may invest without acknowledging receipt and complete review of the PPM. With respect to any “targeted” goals and performance levels outlined herein, these do not constitute a promise of performance, nor is there any assurance that the investment objectives of any program will be attained. All investments carry the risk of loss of some or all of the principal invested. These “targeted” factors are based upon reasonable assumptions more fully outlined in the Offering Documents/ PPM for the respective offering. Consult the PPM for investment conditions, risk factors, minimum requirements, fees and expenses and other pertinent information with respect to any investment. These investment opportunities have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption therefrom and from applicable state securities laws. All offerings are intended only for accredited investors unless otherwise specified. Past performance is no guarantee of future results. All information is subject to change. You should always consult a tax professional prior to investing. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by Issuer, or one of its partner/issuers. Issuer does not warrant the accuracy or completeness of the information contained herein. Thank you for your cooperation.
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1031 Risk Disclosure:
• There is no guarantee that any strategy will be successful or achieve investment objectives;
• Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
• Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
• Potential for foreclosure – All financed real estate investments have potential for foreclosure;
• Illiquidity – Because 1031 exchanges are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.
• Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
• Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits.
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