Friday, December 17, 2010

The Estate Tax Bill Slated for Signature



What follows is a synopsis of the Estate Tax Bill before President Obama for signature as compiled by Gregory W. Beck, CPA, and reproduced from

“RIA Newsstand 12/17/2010”


Estate Tax Relief


EGTRRA phased out the estate and generation-skipping transfer taxes so that they were fully repealed in 2010, lowered the gift tax rate to 35% and increased the gift tax exemption to $1 million for 2010. Under the EGTRRA sunset rule, the estate tax was set to return in 2011, with the top estate and gift tax rate reverting to 55%. For 2010, under EGTRRRA, the basis rules for inherited property were to be similar to the gift tax rules but with many opportunities for heirs to get increases in basis. Under the EGTRRA sunset rule, the pre-EGTRRA step-up in basis rules were to return for 2011.


The Senate passed 2010 Tax Relief Act:


· Lowers estate and GST taxes for 2011 and 2012 by increasing the exemption amount (technically, the applicable exclusion amount) from $1 million to $5 million (as indexed and rounded to the nearest multiple of $10,000 after 2011) and reducing the top rate from 55% to 35%.


· Allows estates of decedents dying in 2010 to choose between (1) estate tax (based on a $5 million exemption and 35% top rate) and a step-up in basis or (2) no estate tax and modified carryover basis. In technical terms, the Act achieves this choice by making the estate tax and basis changes effective retroactively for estates of decedents dying after 2009 but allowing the opt-out choice for estates of decedents dying in 2010.


· For gifts made after Dec. 31, 2010, reunifies the gift tax with the estate tax, with an applicable exclusion amount of $5 million and a top estate and gift tax rate of 35%.


· Provides that the GST tax exemption for decedents dying or gifts made after Dec. 31, 2009, is equal to the applicable exclusion amount for estate tax purposes (e.g., $5 million for 2010). Therefore, up to $5 million in GST tax exemption may be allocated to a trust created or funded during 2010. Although the GST tax is applicable in 2010, the GST tax rate for transfers made during 2010 is 0%. The GST tax rate for transfers made in 2011 and 2012 will be 35%.


· For a decedent dying after Dec. 31, 2009, and before the enactment date, provides that the due date for filing an estate tax return, making any payment of estate tax, and disclaiming an interest in property passing by reason of death is not to be earlier than the date that's nine months after the enactment date.


· Effective for estates of decedents dying after Dec. 31, 2010, allows the executor of a deceased spouse's estate to transfer any unused exemption to the surviving spouse.




Gregory W. Beck


Certified Public Accountant



Gregory W. Beck, CPA


A Professional Corporation


1748 W. Katella Avenue, Suite 107


Orange, California 92867


714/538-1040 Voice • 714/771-7580 Fax • 714/403-0809 Cell


greg@beck1cpa.com