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2010 Estate Planning Update
Posted On 1/1/2010
Congress has left us all with a mess when it comes to estate planning for 2010. With no change in the current law, the estate tax disappears in 2010, then reappears in 2011 with a $1 million exemption and a top tax rate of 55%. (in 2009, the exemption was $3.5 million and the top tax was 45%.)
Most Estate planning professionals fully expected Congress to extend the 2009 tax laws into 2010. However, Congress was so consumed with health care reform that they did not get to the estate tax before the Christmas break. So, as of January 1, 2010 there is no estate tax. One can’t help but think that for those with larger estates, this would be the perfect year to die.
That said, Congress is going to want as many tax dollars as possible to help pay for its spending programs. There is already talk of retroactively reinstating the estate tax as early as February, but it could take longer. If Congress does reinstate the estate tax retroactively to January 1, expect to see lawsuits from the families of those who died while the estate tax was zero.
There are other complications in 2010 besides the estate tax exemption. Some people may have to pay the capital gains tax when they sell assets inherited in 2010. That’s because “stepped up basis,” which increases the value of an inherited asset to full market value as of the date of the deceased owner’s death is replaced in 2010 with a complicated law based on the deceased owner’s income tax basis. Also, the generation skipping transfer tax is schedule to end for one year.
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