Federal Estate Tax, 2010 - Where Are We Going?

By Author: rampandpisan
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When ERTA (Economic Recovery Tax Act) was passed in the year 2000, Ramp & Pisani, LLP, felt it was long overdue, at least as regards the changes it brought about to the federal estate tax.

The applicable exclusion amount, which leveled off at $600,000 in the late 70's, was supposed to be indexed to inflation each year thereafter, but, sadly, never was. Therefore, we lived with the $600,000 applicable exclusion amount for just about 25 years. ERTA raised this exclusion to $675,000 in 2001, $1,000,000 for 2002/2003, $1,500,000 for 2004/2005, $2,000,000 for 2006-2008, and $3,500,000 for 2009. In 2010 the federal estate tax disappears for one year.

In 2011, the applicable exclusion amount goes back to the 2002 level of $1,000,000. In addition, the top federal estate tax rate risers from a low of 45% in 2009 to 55% in 2011.

Ramp & Pisani, LLP, who specialize in estate planning, anticipated that the federal government, given the current economic climate, would ...
... not allow the federal estate tax to disappear entirely for the year 2010, but would, at the very least, reinstate the 2009 applicable exclusion amount of $3,500,000, (some legislators suggested $5,000,000 per individual). Ramp & Pisani, LLP, anticipated that this would take place sometime before April 15th of 2010.

Well, here it is well past that date, and not a hint or glimmer of this reinstatement can be seen. To make matters worse, we lost our stepped up basis which meant that, with certain exceptions, assets included in the estate of a decedent would receive a date of death value basis for income tax purposes - a nice benefit. Unfortunately with the death of the estate tax in 2010, we also see the death of stepped up basis. What we have is now is a new set of requirements which allows us to specify assets to which we want a basis increase applied - $3,000,000 in the case of spousal assets and $1,300,000 for assets passing to other than a spouse.

For this reason, Ramp & Pisani, LLP, can assist you in determining when distributions from estates of individuals dying in the calendar year 2010 should be made, and what assets should be chosen for basis increase. This increase in basis must be carefully utilized in order to minimize any income taxes due on the sale of certain decedent owned assets.

Due to the stepped up basis elections alone, it is estimated that almost 70,000 federal estate tax returns will be filed in 2010 and thereafter. Prior to the change, there was an average of approximately 5,000 federal returns filed.

About Author:
Ramp & Pisani, LLP is a small town law firm with a big city mentality located in Tenafly, New Jersey. We are a full service law firm with a particular emphasis in employment law, estate and estate planning, real estate, business law, and elder law.