Iris Bikel, Attorney at Law

Estate Planning and Elder Care

Estate Planning Beyond 2010         

When President George W. Bush signed the economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) into law, the Gereration-Skipping Transfer Tax (GSTT) and Estate Taxes were suspended.  What was the purpose behind the Act?  Did it work?  What now?  Few of us thought that Congress would a "sunset" provision unchanged and at the last minute, Congress did act to close the gap.  What does this mean for Estate and Tax Planning for 2011 and beyond?

The Issues:

The purpose of the EGTRRA was to provide relief from Estate Taxes to millions of Americans.  The Estate Tax rate was reduced to 45% and by the year 2009 exemptions had slowly increased to $3.5 million.  Then, in 2010, the GST Tax and Estate Tax were completely abolished.  The thought was that both taxes would be permanently repealed.  But, because the cost of no taxes was feared as unfeasable and economically unsound, Congress added a "sunset" provision which allowed for no Estate and GST Taxes for one year only and a reversion back to levels that coicided with EGTRRA basically never having existed in 2011.  Congress was  given an opportunity to act.

So what now?  Well, if Congress hadn't acted, by January 1, 2011, the provisions would have reverted back to 2001 levels with Exemptions limited to $1 million dollars and teh Estate Tax increased from 45% to 55%.  But, happily, Congress worked with President Obama to come up with a new plan, at least for the next two years anyway.  And indeed, 2010 was allowed to stay as is.  What are the consequences?

House Proposal:

President Obama seems to have favored a return to 2009 levels with a $3.5 million exemption and a 45% tax rate from 2010 and beyond as a permanent solution.  Senator John McCain and the Republican base seem to favor a $5 million exemption and as low as a 15% tax rate.

However, under the new agreed upon House proposal, the we now have a formula for 2010 as well as 2011 and 2012, where a new administration may take office and we may start this process all over again!  For now, a compromise was reached.  The following was agreed upon, according to a CCH Tax Briefing Bulletin:

  • 35% maximum estate-tax rate
  • $5 million exclusion for individuals; $10 million for married couples
  • Stepped-up basis for “all assets included in the gross estate”
  • Repeal of carryover basis (used in 2010 on capital gains in estates)
  • Heirs can choose, for those who died during 2010, the new 35% maximum estate tax with the 35% applicable exclusion and carryover basis rules under EGTRRA or the revived stepped-up basis rules under the bill and no estate tax.”
  • Spouses can choose to use the “unused portion of the estate tax exclusion,” of the spouse who died before them

Needless to say, Democrats have voiced many opinions on the viability of the House proposal and it remains to be seen what happen next.

The Impact on Individuals:

There doesn't seem to be a great impact on most of us and the largest issue is for those that died in 2010 and whether the Executor of their Estate should elect to opt out of the estate tax option or not.  As stated in Proskauer Rose LLP's briefing,  

     If the value of the decedent’s estate is $5 million or less (including gifts made during life in excess of annual 
     exclusion gifts), an executor should not elect  

     out of the application of the estate tax. No tax will be due, and a full basis step-up will be


If the value of the decedent’s estate is over $5 million, the executor should opt out if the benefits of the additional basis step-up are outweighed by the estate tax that would otherwise be due. A qualified tax professional can conduct such an analysis to determine whether the election should be made.
Proskauer's HR Brief

Paul Sinaly, MBA and a licensed NY Certified Public Accountant, added the passage of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, aka the 2010 Tax Relief Act, certainly provides some very clear tax law and allows us to now work closely with our clients in tax planning for at least the next two years.


The 2010 Tax Relief Act now imposes a maximum estate tax rate of 35% with a

$5 million exclusion ($10 million for married couple with proper planning) for

decedents dying after January 1, 2011 and before December 31, 2012. The exclusion amount is to be adjusted for inflation.


The Act also maintains traditional stepped up basis rule for all assets included in Gross Estate for decedents dying after January 1, 2011 and before December 31, 2012. Prior to the Act being passed, the stepped up basis rules were replaced with modified carry over basis rules.

Disclaimer: This site is provided for informational purposes only. While legal issues are discussed, it is not legal advice or legal representation. We make no warranties or guarantees as to the accuracy and authenticity of the information provided herein and suggest that you contact an attorney to discuss your particular situation.








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