Estate Planning 2010 Tax Changes

Important Tax Changes Effective January 1, 2010

May Affect your Estate Plan

Effective January 1, 2010, the federal estate tax and generation-skipping tax have been repealed for individual dying during 2010 and for generation-skipping transfers made in 2010. Please note that the gift tax laws have not changed except as to certain specialized trusts.

HDBOB estate planning and probate attorneys Randall W. Sayers and Trisha A. Vicario, like the tax and estate planning community at large, expected Congress to amend the Internal Revenue Code (“Code”) before the end of 2009 to prevent the repeal. However, because Congress did not take such action, it is now necessary to determine whether your estate plan (Will and/or Trust) should be modified. Wills or trusts which refer to the “marital deduction,” the “federal estate tax,” the “unified credit,” the “estate tax exclusion amount,” and/or the “generation-skipping transfer tax” should be reviewed promptly. We suggest that all individuals with an estate plan (whether or not drafted by HDBOB attorneys) review their documents to see if such tax language is used in their documents.

If any of the documents contain tax oriented language either identical or similar to the language mentioned above, individuals with such documents are encouraged to either speak to the attorney who drafted the original estate plan or contact HDBOB estate planning attorneys Randall W. Sayers or Trisha A. Vicario to discuss whether the estate plan should be modified.

Irrespective of the January 1, 2010, tax changes, if your estate plan documents have not been revised after 2001, they are likely out-of-date as to the federal tax aspects and should be reviewed. Under the Code as it now stands, on January 1, 2011, the estate tax and generation-skipping tax will again be effective with rates up to 55% (2009 rates were 45%) and an exemption amount of $1,000,000 per individual (2009 exemption amount was $3,500,000 per individual) in effect in 2001.

Additionally, effective on January 1, 2010, and for the remainder of 2010, any assets passing to an estate or trust beneficiaries will not receive an income tax basis adjustment to date of death values. We suggest that everyone maintain their financial records, as the factual investigations necessary to determine the cost basis of property held for many years will be impossible without such records.

Congress may well amend these tax laws during 2010, and it is possible that any such amendment will be retroactive to January 1, 2010. However, it is impossible to predict what action, if any, Congress will take. Accordingly, we advise a thorough review of your estate plan to determine if revisions are necessary based upon current law.

Please contact Randall W. Sayers at (651) 332-8725 or Trisha A. Vicario at (651) 332-8730 with questions about the tax changes, to discuss your estate plan, or to schedule an appointment to review your estate plan.