You may have heard that the federal estate and the generation-skipping transfer taxes have been temporarily repealed in 2010.
So, how does this affect you and your estate plan?.
Your estate planning documents have been prepared to ensure that your family and financial goals are met after you die. The estate planning documents tell everyone exactly where you want your assets distributed.
Most estate plans use formulas to divide your estate into separate shares to minimize federal and state estate taxes. The division of assets is usually based on the federal tax law using specific formulas. With the repeal, the tax law has been changed possibly making the formulas used in your estate plan inconsistent with the federal estate tax law in 2010. We believe this language should be reviewed to make certain your intent is consistent with your estate plan and the federal estate tax law in 2010.
Another part of the change in the law is that property received from a decedent’s estate will now retain the basis of the decedent, referred to as carry-over basis. This could have a long reaching effect well after 2010. Prior to 2010, and starting again in 2011, assets received a step-up in basis to the fair market value of the property at the decedent’s date of death.
This change is quite complicated and the estate can choose to take a step-up in basis for only $1.3 million of assets. For any amount over this, the heir’s basis will be the decedent’s basis. The basis of property passing to a surviving spouse can be increased by $3 million. Your estate documents should take into account these new basis rules and limitations for 2010.
Changes continue to be expected by congress during 2010. We suggest that you review your estate documents with your attorney.
Source: Congressional Budget Office
About Blackman & Sloop CPAs, P.A.:
Blackman & Sloop is a full-service CPA firm headquartered in Chapel Hill, North Carolina and is actively involved in auditing, taxation, management consulting, financial planning, and related services. The firm directs a large part of its services toward providing management with advice on budgeting, forecasts, projections, financing decisions, financial analysis, and tax developments. The firm also performs review and compilation services and prepares not-for-profit, corporate, individual, estate, retirement plan, and trust tax returns as well as technology consulting services regarding installation and training on QuickBooks. Blackman & Sloop provides services in Raleigh, Durham, Chapel Hill, RTP, Hillsborough, Pittsboro, Charlotte, and the rest of North Carolina. To find out more please visit http://www.blackmansloop.com
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