Goodbye, Estate Taxes
So, the big news for estate planning on this last day of 2009 is that effective tomorrow there is no federal estate tax. This means that if a Florida resident dies tomorrow 1/1/10 there is no federal estate tax due. Since Florida has no estate tax of its own, it means there is no estate tax at all.
There are two downsides to this:
1-Congress might try to pass a new tax law in 2010 that purports to be retroactive to 1/1/10. Many tax experts think such a law would be unconstitutional. Generally, we Americans like our laws to take effect after the law is passed so that everyone has fair notice of what they are required by the government to do.
2-The other downside is that stepped-up basis also expires with the estate tax law today. This could have a more far-reaching effect on most Americans since most Americans die with less than $1 million so their estates would not incur estate taxes anyway. The loss of stepped-up basis, though, affects everyone because it relates to income taxes. Income taxes are alive and well and are not expiring with the estate tax today.
The bottom line is that Americans who die after today will leave estates that do not incur estate taxes but may very possibly pass assets to their heirs with substantial potential for increased income taxes when they are sold or the gain is otherwise triggered. This should keep the tax lawyers and accountants busy throughout 2010. Not to mention Congress.
Jim Martin 12/31/09
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