December 2010
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The Planner
Special Edition!
A monthly newsletter for clients and friends
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Invite an estate planning expert to speak at your next client,
staff, professional, or community event.
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Event Calendar -
December
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Please feel free to attend any of these upcoming events! (Click any course title for details)
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January 12, 2010 2:00 p.m. - 3:00 p.m. at our Austin office. You are welcome to stay for the Medicaid workshop starting at 3:15 p.m.
- January 18, 2010 2:00 pm - 3:00 p.m. at our Georgetown office. You are welcome to stay for our Medicaid workshop starting at 3:15 p.m.
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January 12, 2010 3:15 p.m.- 4:15 p.m.at our Austin office - you are welcome to attend our Estate Planning workshop which begins at 2:00 p.m.
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January 18, 3:15 p.m.- 4:15 p.m.at our Georgetown office - you are welcome to attend our Estate Planning workshop which begins at 2:00 p.m.
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Listen In - Retiring Smart: The Cost of Aging
What Does Long-Term Care Cost? Who Pays?
Will Long-Term Care Get a Federal Makeover?
Plunging Life Insurance Values May Threaten Your Estate Plan
Communication is Key When Planning for the Future
Wrongful Resuscitation
7.2.09 Planner AlertLast Will of Michael Jackson 6.1.09 Planner
Listen In: When to use an Elder Law Attorney
Online Services Offer Estate Planning for the Digital Age
Keeping Mom and Dad Safe at Home
Family Business?...You Might Flip For A FLP...
Reverse Mortgage Variation is Aimed at Seniors Looking to Downsize
Stimulus Payment to Social Security Recipients Arriving
Economic Stimulus Law: How Does It Impact You?
Listen In: 3 Reasons Why a Will is Not Enough
The Dangers of Joint Accounts
Understanding the New Economic Stimulus Law: How Does It Impact You? What the Stimulus Bill Does for the Elderly
Time and Tide Wait for No Man
NYT RE: Estate Planning
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Greetings!
Happy Holidays and welcome to a special edition of The Planner! After putting us through 349 days of uncertainty, Congress finally passed a bill yesterday at midnight that sets taxes for the next two years. Today, President Obama made that bill law with his signature. Although this new tax legislation is interesting to every American for countless reasons, we as estate planners are particularly interested in what this law means for our clients in light of the estate tax provisions. In this brief special edition, we're going to highlight the changes in the estate and capital gains taxes that you need to know about. Then stay tuned next month, when we'll look in more detail at the new law once the dust has settled.
Cheers,
Ronald G. Greening
The Greening Law Firm, P.C.
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The Tax Relief, Unemployment Insurance
Reauthorization and Job Creation Act of 2010 (2010 Tax Relief Act) (H.R. 4853) and the Estate Tax: What You Need To Know
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The 2010 Tax Relief Act
The 2010 Tax Relief Act is set to last for two years, so its effects will carry over into 2012. The law's estate tax provisions will not only affect estates in the next two years, however; it could also affect estates for those who died in the past year, as well. Let's take a brief look at what the 2010 Tax Relief Act means for the next two years and for 2010.
The Estate Tax in 2011 and 2012
Had Congress not acted, the estate tax would have reverted back to a rate of 55% with a $1 million exemption per person. The 2010 Tax Relief Act sets the estate tax exemption much higher-- $5 million for an individual--and sets the rate at which all non-exempt property will be taxed at 35%, meaning that fewer estates will be exposed to estate taxes, and those that are will pay the Federal government at a lower rate.
Additionally, the 2010 Tax Relief Act brings back the step-up in basis for assets that accrue capital gains. Under tax law prior to 2010, any assets that passed to someone when the owner died received a new tax basis ("step-up basis") valued at fair market value at the date of death. This meant that an heir/spouse would not have to pay capital gains tax on any of the growth in value that occurred during the prior owner's life. But in 2010, property that passed at death did not automatically receive this step-up in basis. Instead, each individual has a limited amount of property that can be stepped-up in value. Property that does not receive this step-up value will be subject to tax on all increases in value from the date the original owner first acquired the property.
So, if you inherited a stock from your father in 2010 that he bought for $2 in 1970 that is now worth $50, you may be taxed on the $48 increase in value when you sell the stock under 2010 tax law. Of course, any gain over $50 still may be subject to capital gains tax. In 2011 and 2012, however, the stock's value would "step up" from $2 to its current value, and the $48 gain in value would not be taxed when you sell the stock. Again, any gain over $50 still may be subject to capital gains tax.
The Estate Tax in 2010
A less-discussed and more complicated provision of the 2010 Tax Relief Act gives estates created in 2010 a choice of laws. On one hand, the new tax bill sets the $5 million estate tax exemption retroactively to January 1, 2010. The bill also reinstates stepped-up basis--again, retroactively. So estates for people dying in 2010 can follow the new law for estate tax and capital gains tax purposes. But they don't have to.
As an alternative, estates for people dying in 2010 can elect to follow the estate and capitals gains taxes already on the books in 2010: no federal estate tax, but no step-up in basis, either. So the upside to that law is that estates aren't subject to the estate tax. The downside is that inherited assets under that law carry the decedent's basis. While there are exemptions that allow for certain assets to receive a step-up in basis, administrators of estates holding assets that have substantially increased in value over the decedent's lifetime might subject the estate's heirs to a whopping tax bill by choosing 2010 law.
We highly recommend that you consult an estate planning attorney or licensed tax adviser before filing an estate tax return for 2010.
We will revisit these issues in more detail in our January issue of The Planner. Until then, continue to read the news and explore the implications of this bill, both for estate tax purposes and otherwise. If you have any questions, please call us at 512.476.0888.
Wealth planning, tax, and legal advisors: this morning, the Advisor's Forum prepared a brief podcast which discusses some planning ideas that advisors can do between now and December 31, 2010 and in early 2011.
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Practice Limited to Estate Planning, Estate
Administration, Probate, and Elder Law
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506 West 15th Street, Austin, Texas 78701, 476.0888
1601 Williams Drive Georgetown, Texas 78628, 931.0888
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