Estate tax for 2010 and beyond

Posted by Andy
Congress has finally brought some clarity to the estate tax situation with the recent tax legislation that was signed. Here are the highlights:
  • You can now choose to apply the new or old rules to estate in 2010.
  • The old rules - No estate taxes but everyone has carryover rather than stepped up basis in the assets they inherit. (In reality some designated assets will receive stepped up basis through a lower exclusion).
  • The new rules - 35% estate tax on assets greater than 5 million. All assets receive a stepped up basis to their FMV as of the date of death. Also, the $5 million exemption is portable, so that if a spouse dies after 2010 and doesn't use all their exemption then the surviving spouse can inherit the unused portion through 2012.
While the death tax is seen as completely unfair and should be rid of completely by many, this seems to be a fair compromise that will exempt the vast majority of estates and offer the tax benefits of the stepped up basis to the majority of Americans.

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