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Alas, no "step-up" in basis for a beneficiary who gets an IRA, 401k, 403b, etc. All the money becomes "ordinary income" when drawn out of the retirement vehicle. The relationship of the beneficiary matters only in the case of a spouse, who may treat the qualified funds as their own...

The term "heirs" refer to those specifically named in your written will, or those designated by the probate court.

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