The estate tax, that tax on the fair market value of a decedents assets, kind of “expired” in 2010. That is, if one passes away in 2010, there is no estate tax. I read that George Steinbrenner’s estate was worth something like $1.1 billion which means his estate gets a pass on $500 million to $600 in estate tax.
This is all part of the 2001 tax act that was a slow burning fuse of tax changes. This fuse is set to burn out at the end of 2010. At this point all the Bush tax cuts and changes go bye bye and we revert to pre 2001 tax law. This includes the estate tax. Without any change, extension or revision, on January 2011 the estate tax freebie exemption on which no tax is paid, reverts to $1 million and a 55% top tax rate.
It is likely there will be changes before the tax act sunsets at the end of this year. House Democrats have passed legislation to bring back the tax at 2009 levels ($3.5 million) and making it retroactive to January 1, 2010 (sorry George). In the Senate, legislation has been introduced to set the exemption at $5 million and a top rate of 35%. This proposed legislation would also let estates for decedents dying in 2010 to pay tax at this years 0% tax with no ‘stepped up’ basis (a revaluation of the tax basis of the assets), or keep the stepped up basis and pay tax under the new proposal.
None of these proposals have been passed as yet but just wanted to give you an update of the doings out there in Washington. Stay tuned.
If you have any particular questions for your situation, feel free to contact me at (805) 264-3305.
Thanks for reading. Bob
