What if a loved one died in 2010?

As we all know by now, Congress let the estate tax law expire in 2010, then reinstated it starting in 2011. Will what if a loved one died in 2010? What do you do?

As usual, Congress has made this a “little” complicated.  We will try to demystify your options and how it applies.

When the estate tax law expired in 2010, not only do the estate tax go way, so did the “step up in basis” (see prior blog post for details). The 2010 Tax Relief Act allows estates of decedents dying in 2010 to choose between (1) estate tax (based on a $5 million exemption and 35% top rate) and a step-up in basis, or (2) no estate tax and modified carryover basis.  

If you elect to have the new law apply, then estate tax return filings “as usual” would apply.  However, if you elect the “no estate tax” option then a special form needs to be filed with the beneficiaries (the person receiving the inheritance) individual income tax return.  The IRS has not yet issued this form, so special care should be given if you elect the “no estate tax” option.

This is a very complicated area of law and you should consult with us or your tax attorney before making any moves.

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