Tax code estate planning changes made in 2010

2010 ended with Congress passing new laws that have significant impact on estate planning. Under the new laws, there is a $5 million estate tax exemption, a $5 million lifetime exemption for gifts, a 35% tax rate for both estate and gift taxes, and full basis adjustment to date of death value.

Executors for those who died in 2010 will have the option of electing no estate tax with a modified carryover basis (unlimited step-down for loss assets and a limited step-up of $1.3 million plus $3 million for assets passing to a spouse). Executors have an additional nine months after the enactment date to decide, file and estate tax return, pay taxes and make disclaimers.
The executor of an estate in 2010 with less than $5 million can elect to administer the estate under the new laws that provide full step-up basis for all property, including property in which a life estate was reserved by the decedent or property held in a wholly owned irrevocable grantor trust.

The above changes expire on January 1, 2013. If Congress does not act again, the gift, estate and GST exemptions will be $1 million (adjusted for inflation).

-Posted by Lisa Joyce, JD