Will Congress change estate taxes?

One question for the new Congress is whether to change the current estate tax schedule. The current schedule is rather bizarre and can yield wildly different results depending on the year in which a person dies.

Generally, a person who dies in 2007 or 2008 can transfer $2 million to heirs without being subject to estate tax (not including bequests to a spouse, which are tax free up to any amount).

In 2009, this figure rises to $3.5 million. In 2010, the estate tax is repealed, but in 2011 not only does it come back, it does so with only a $1 million exemption and a much higher tax rate. That means a fortune could literally ride on whether someone dies in the final days of 2010 or in the first few days of 2011.

The tax basis rules also change dramatically. Currently, if you inherit property, your new basis (for calculating the capital gains tax when you sell) is the property's value at the date of the first owner's death. Your basis is stepped up from the owner's original basis.

In 2010, all this changes, and you have to keep the first owner's basis (or the date-of-death value, whichever is less), except that you can step up the basis to $1.3 million of the property (or more if the property is given to a spouse). But then in 2011, everything reverts to the old step-up rules.

It will be interesting to see if the new Congress decides it's not appropriate for such dramatically different results to occur for people who happen to die in one year rather than the next.

In any event, these wild swings in the tax laws mean it's more important than ever to have a solid estate plan in place - one that will maximize your ability to care for your loved ones regardless of the crazy legal landscape. We can help you put together a plan that will take all these issues into account and set your mind at ease.

Mark Greene & Associates (MG&A)
Attorneys & Counselors at Law
Assinippi Village, Hanover, MA
www.MarkGreeneLaw.com
Mark@MarkGreeneLaw.com