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by Richard Schneider
Emeritus professor of accounting
My tax service, Kiplinger, continues to report a logjam especially in the Senate. Each side trying to score political points for the upcoming elections, thus nothing much is happening.
Due to a quirk in a past tax law, Title V of the Economic Growth and Tax Relief Reconciliation Act of 2001 which repeals the estate tax for decedents dying after December 31, 2009 and before January 1, 2011, there is no estate tax for 2010. Kiplinger’s forecast is that congress will not act in the last months of the year to reinstate the tax retroactively. For those individuals with estates in excess of $3,000,000 there is no estate tax in 2010, but only the property up to $1,300,000 in value will get a stepped up basis for tax purposes, with the rest in most cases getting the basis of the descendent, unless the heir is a surviving spouse than it is $3,000,000. This means that for large estates some of the property received by an heir will generate a long term capital gain tax, which will still be lower than the estate tax.
The conclusion is that if you have an estate in excess of $3,500,000 this is the year to pass-over and pass-on your estate to minimize overall taxes. For 2011 and beyond, if your estate is under $3,500,000, don’t worry, no tax for you or your heirs, assuming congress acts to put the exemption at the 2009 levels. If congress fails to act the exemption level returns to an older amount of about $1,000,000. My estate is safe from tax in either case.
As always consult your professional tax advisor, as individual circumstances differ. They will help in compliance with current law and planning to legally minimize the tax bite.
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