2010 Heirs Still Have Time to Decide On Which Tax Year to Choose for Filing Estate Tax Returns

12:51 pm Uncategorized

calendar 150x150 2010 Heirs Still Have Time to Decide On Which Tax Year to Choose for Filing Estate Tax ReturnsThe estate tax overhaul last December allowed for the heirs of those who died in 2010 to file their estate tax return under either the 2010 or 2011 system.  A recent Wall Street Journal article explores the pros and cons of filing under each, stating that the choice largely boils down to the size of the estate.

If heirs elect to file under the 2010 system, there are no estate taxes; however, the cost basis of the assets left in the estate – which determines the capital gains tax – does carry over to the heirs.

If heirs file under the 2011 system, the estate tax exemption is $5 million per person and a top tax rate of 35 percent; however, all assets in the estate receive a “step up” in asset basis to the value at the time of death.

The article notes that it may be more beneficial for heirs of large estates to use the 2010 system, and those who inherit estates less than $5 million to opt for filing under the 2011 system.

Stuck somewhere in the middle are mid-size estates over $5 million that will need to find the “crossover point” where it makes sense to pay estate taxes today rather than capital gains taxes tomorrow.

Whichever way you decide to go, there is still time to make the decision – the IRS’ Form 8939 that is used to file 2010 estate tax returns is still in draft form and it’s unclear both when it will be completed and when it will be due.

What is clear is that our Orange County estate planning law firm can help you understand tax saving strategies to protect your assets.

Contact us today and let our Newport Beach law firm help you with all your financial planning needs.


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