Estate Taxes

Hello, Joe,

What are you hearing about the estate taxes for 2010?

Barb, Edina, MN

Hello, Barb;

There’s a fair amount of speculation about what will happen with the estate taxes.  The current federal estate tax law allows a $3.5 million dollar exclusion.  However, the estate tax is due to be completely eliminated in 2010 (This is a sunset provision written years ago into law).  However, a number of sources view such an event as unlikely to happen.

There are two reasons that this is unlikely.  First, the current federal budget deficit will require tax revenues to be at least be at the 2009 level for the foreseeable future.  Secondly, if the estate tax expires, the step up of basis in assets passing through an estate would expire as well.  Beneficiaries have limited knowledge about the cost basis of assets that are held by decedents.  The potential complexity of unknown or incomplete cost records would cause both the beneficiaries and the IRS overwhelming problems.

The most likely legislation will be simply an extension of the existing estate tax laws and exemption, for another year.  This will allow a busy Congress to visit the issue next year.  The majority of clients still believe that “I’m going to get taxed some how, some way, and I’m not going to like it”,

Estate planning is still important.

Joe
photo credit: simonsimages

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