Estate Tax Repeal, Now What?
When January 1, 2010 rolled in, the federal estate tax became repealed. Congress could not agree on a compromise so we are left with uncertainty. Everyone should discuss their current estate plan with their advisor and make necessary revisions. What might those revisions be?
1. Most estate plans minimize taxes with a formula that incorporates the estate exemption. This may not function effectively if there is no estate tax.
2. Some estate plans dictate the exemption shall go to children or in trust for children and the rest goes to spouse. If there is no exemption, some spouses could be disinherited if there is no change to their documents.
3. Some estate plans tie their gift to grandchildren to the GST exemption. If this amount does not exist, then grandchildren could be disinherited if there is no change to the documents.
4. Now there is carryover basis which replaces step-up in basis on assets. This is a change in the income tax treatment of assets. The new law directs that a decedent’s basis in assets carries over to those who inherit the property with upward basis adjustments in certain circumstances. Many estate plans will need to be revised to take advantage of these provisions. Also, in light of the new carry over rules for “basis”, the environment is ideal for those who have both appreciated assets and charitable inclinations. If you have both, a charitable trust can be a very effective financial planning tool as well as an estate planning tool that can reduce your income taxes and creates a monthly stream of income for the rest of your life. Oh, and the best part is, it will also support your favorite charity.
Mark F. Winn
Attorney at Law, PLLC