Status of Federal Estate Tax

In our last posting we mentioned the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” (how is that for a name!) and the changes it brought to the federal estate tax.  The new legislation also provides some flexibility for the estates of individuals who died in 2010.  Personal Representatives of Decedent’s estates will be permitted to select either:

  • The 2010 rules, when the  estate tax disappeared for one year, but which permitted a limited “step up” in basis at death, or
  •  Application of the new rules, with the $5 million exclusion and an automatic basis adjustment for all assets.

Large estates will most likely prefer the 2010 rules.  However, estates under the $5 million threshold might benefit from the new rules.

Also of note is the fact that as to the estates of individuals who died during 2010, the due date for filing returns is extended to Sept 17, 2011.  That date is nine months after the date of the enactment of the new legislation.

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