Taxation & Estate Planning

Greenville Estate Attorney: ?Estate Tax Proposal from Senators John Kyl and Blanche Lincoln?

By Christopher L. Miller

A recent development on the federal estate tax.  Senators Kyl and Lincoln are still working together to enact legislation fixing the current estate tax regime.  Under their proposal, the estate tax will return in 2011 with an exemption of up to five million dollars per person, ten million dollars per couple, to be indexed for inflation.  There would be a return to stepped up basis for inherited assets.  The rate of tax would gradually be reduced to 35%.

A novel idea is also to give estates of persons passing away in the year 2010 the choice to either pay estate tax under the new system and receive stepped up basis, or not pay estate tax and deal with the carry over basis rules and the resultant capital gains taxes. Such a decision calls for an evaluation of the economics of paying the estate tax versus paying the capital gains taxes (generally, smaller estates will be better off paying the estate tax and getting the stepped up basis for estate assets, while larger estates far in excess of the exemption would likely be better off paying the capital gains tax).  Such an evaluation would be similar to the evaluation currently undertaken to determine whether it is more beneficial to report estate asset values as of the date of death versus the alternate valuation date.  

Back to my all too familiar refrain on this issue: stay tuned.

Full post as published by Res Publicae - The New York Estates Blog on July 20, 2010 (boomark / email).