No 2010 Estate Tax - Heartburn or Party Time?

Published on: 11:04AM Feb 09, 2010
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February 9, 2010 – You’ve no doubt seen that a lot of attention has been paid to the recent congressional discussions focused on health care, unemployment, and job creation. However, a topic you may not have seen much about is the fact there is no estate tax on death during 2010! No doubt, the “management” of death for individuals and families of wealth has been an important one for a great many years. In 2009, for example, individual estates had an exemption of $3.5 million in value from estate taxes. And for those who inherited property in 2009, the assets that they received were given preferential tax basis treatment with the automatic “step-up” in tax basis – essentially a forgiving of the capital gain that had occurred during the life of the party who passed the asset to their beneficiary. So with no limit on the size of estates in 2010, and no tax, this must be a great deal, right?
Not so fast. As Marcia Zarley Taylor, DTN executive editor, recently wrote, the expiration of the previous tax law is causing some unintended consequences – and major heartburn for tax and estate planning specialists. To read the article, click here. If nothing is done about this issue by Congress in 2010, the estate tax exemption in 2011 will revert back to $1 million in value – from an unlimited dollar value in 2010. And as Ms. Taylor implies, it doesn’t take too many assets in today’s world to race through the $1 million in value exemption. That said, many who thought they were insulated/safe from estate taxes could be caught in the crosshairs in 2011. In addition, while the size of estates is unlimited from estate taxes in 2010, the preferential “step-up” in basis tax treatment is no longer in play – so beneficiaries have a lot more to think about, and to do, if they plan to sell capital assets that they inherit in 2010, as capital gains could be significant. And you thought the grain markets were suspect to volatile swings! It seems that tax and estate planning circles always assumed that Congress would act to ensure some consistency at the expiration of this part of tax law – but so far it appears little has been done. 
So what do you think – should Congress do anything moving forward concerning the tax treatment for estates? What do you think their inaction could do to the land market? E-mail me at [email protected] with your thoughts.