IRS Issues Guidance for Estates of Those Who Died in 2010

1:48 pm Uncategorized

IRS Logo1 150x150 IRS Issues Guidance for Estates of Those Who Died in 2010Late last week, the IRS finally published guidance for the executors of estates of individuals who passed away in 2010 in the form of Notice 2011-66, which explains how executors can opt out of estate taxes, and Revenue Procedure 2011-41, which explains the tax rules that apply when opting out of the estate tax.

As you will recall, the estate and generation-skipping transfer taxes that were repealed for 2010 were reinstated retroactively to Jan. 1, 2010 when President Obama signed the 2010 Tax Relief Act into law last December.

However, the new law also gave the estates of those who died in 2010 a special tax break:  they could elect to opt out of the default estate tax regime and receive a full step up in basis on estate assets.

For those who elect to be subject to the estate tax and receive a full step up in basis on the assets included in the estate, here are the highlights from the new draft Form 706:

  • Exclusion amount is $5 million
  • Maximum estate tax rate is 35 percent
  • GST rate is zero
  • Calculation on prior gifts must be at the rate in effect on the date of death
  • The due date for decedents who died between Jan. 1-Dec. 16, 2010 is Sept. 19, 2011; for those who died after Dec. 16, the due date is nine months after date of death.

The alternative is for executors to elect to apply modified carryover basis treatment to property acquired or passing from the decedent and pay no estate tax.  The Section 1022 Election can be made on Form 8939, and must be filed by Nov. 15, 2011.

Our Orange County asset protection law firm can guide you through asset protection and estate planning strategies to meet your unique needs.

Your California legal and financial planning experts are at your service; Contact us today.

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