Background: In 2001, President Bush signed legislation on the federal estate tax. In basic terms, the law raised the dollar amount of the exclusion from tax over the span of ten years while also cutting the rate of taxation on taxable estates. This gradual increase in the excluded amount of estate assets subject to the federal estate tax was effective through December 31, 2009.
Under that law, the tax disappeared completely for deaths in 2010. Also, the “step-up” in basis for capital gains on inherited assets was eliminated for 2010; capital gains taxes will be due based on the cost basis from the original purchase price of the inherited assets, subject to a $1.3 million exemption.
The public and tax professionals assumed that Congress would enact new legislation before the end of 2009 to “fix” that nonsensical situation. Not only did that not happen, Congress did not acted on the question of the federal estate tax.
In 2011, the federal estate tax returned to a $1 million exclusion with a tax rate of 55%.
Please contact us to discuss your current personal situation in regard to this critical Estate issue and others.