|No Federal Estate or Generation-Skipping Transfer Taxes ...For Now|
January 1, 2010 was not a "Happy New Year" for Uncle Sam. The dramatic changes not anticipated to occur under the 2001 Economic Growth and Tax Relief Reconciliation act of 2001 ("2001 Bush Tax Act") actually occurred... There are currently NO Federal Estate or GST Taxes!
For now, there will be no federal estate or GST Taxes imposed on estates of decedents dying in 2010. The trade off, however, is that beneficiaries will not receive a stepped-up basis in the decedent's property. Rather, the property inherited will receive the lesser of the decedent's basis or the fair market value of the property on the decedent's death. That is correct - while there is no "step-up" there may be a "step-down." Washington State's estate tax, with a top rate of 19%, will still apply on all estates of Washington residents dying in 2010 if the estate's value is more than $2,000,000. And, the Federal gift tax is still alive and well, although currently at a lower rate of 35%.
So what are the implications? Key lawmakers expect a fight over how to reinstate the the federal estate and GST taxes. Senate Finance Committee Chairman, Max Baucus, said Congress will work to reinstate the federal estate and GST taxes retroactively to the first of the year. Such an application may be unconstitutional, and we should expect a spirited legal fight if they attempt to do so.
In the interim let's review your plan to ensure it still achieves your objectives under current law. We'll determine whether you would like to take advantage of certain estate planning strategies that can be utilized during the current lapse in the Federal GST Tax.