As of this writing, March 1st 2010, Congress has still not fixed the Federal Estate Tax issue. The limits that passed tax-free to heirs has increased over the years and at 12/31/2009 was $3.5 million (easily $7 million for a married couple with a simple by-pass trust in their will). The tax rate in 2009 was 45% on estates over these amounts.
In 2010, there is no Federal Estate Tax. Many know this, but fewer know that there are two exceptions to this "no" tax.
(1) On death, the first $1.3 million receives no taxes but the excess does not receive a "step-up" in basis. In other words, your heirs receive the original cost basis of assets over $1.3 million and, if they sell them, they must realize a capital gain. (Prior to 12/31/09, all assets passed to heirs at their market value, so if then sold, there would be no gains)
(2) If you are married, then an additional $3 million can pass to heirs with the "step-up" in cost basis so heirs can avoid further capital gains treatment.
Let's hope that Congress fixes this soon (and the AMT tax, too) because trying to calculate the original cost of something that may have been purchased many, many years ago could be difficult if records are not properly maintained.
Keep in mind, this is the gross estate which includes items like life insurance proceeds, too, and home equity values. Some can reach these limits pretty quickly.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.