Estate Planning: Helping Protect Your Interests

Death to Death Taxes: The Future of the Estate Tax Under the Proposed Tax Plan

Brian C. Zaldivar

Brian C. Zaldivar




Authored by Brian C. Zaldivar with contribution from Misty A. Watson

“Death will no longer be a taxable event in America,” said U.S. Vice President Mike Pence during a speech to a Michigan crowd in late September 2017.  Among the many proposed tax revisions, the House (“Tax Cuts and Jobs Act” or “H.R.1”) and the Senate’s proposed bills have increased the credit against the estate, gift, and generation-skipping transfer tax. The House eventually repeals the estate and generation-skipping transfer tax; however, the Senate allows the estate tax and gift tax to remain intact.

Under current law,

  • Property in an estate is generally subject to a top tax rate of 40% before it passes to the estate’s beneficiaries.
  • Additionally, property that is transferred beyond one generation, whether by bequest or by gift, is subject to an additional generation-skipping transfer tax, also with a top tax rate of 40 percent.
  • The first $5 million worth of transferred property is exempt from the estate, gift, and generation-skipping taxes, in any combination thereof. This amount is known as the basic exclusion amount and is indexed for inflation ($5.49 million for 2017).
  • Transfers between spouses are excluded from these taxes, and when an individual dies without his or her assets exhausting the basic exclusion amount, any unused basic exclusion amount passes to his or her surviving spouse, with a top basic exclusion amount of $10.98 million for 2017.
  • When a beneficiary receives property from an estate, the beneficiary generally takes a basis in that property equal to its fair-market value at the time the decedent dies, which is known as taking a step-up in basis. However, when a donee receives a gift from a living donor, that donee generally takes the donor’s basis in that property, which is known as taking a carryover basis.

As proposed in H.R.1 and the Senate Bill, Continue reading »

Important Tax Options for Estates of Those Who Passed Away in 2010

Misty A. Watson

Misty A. Watson




For trustees and personal representatives of 2010 estates, new legislation passed on December 17, 2010, provides two options for tax treatment of assets from an estate created in 2010.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 made sweeping changes to estate taxes for 2011 and 2012 and retroactively made several changes for estates in 2010.

The new estate tax law allows an estate created in 2010 to elect out of the estate tax for 2010 which results in the application of the modified carryover basis rules.

Option One – Modified Carryover Basis

Elect out of the estate tax and complete IRS Form 8939 to allocate which assets in the estate will have their basis increased to the value of the assets as of the decedent’s date of death. This allocation is limited to $1,300,000 for non-spouse beneficiaries and $3,000,000 for a spouse beneficiary.

The executor of the estate is given the authority to complete the Form 8939 and make such allocations of the basis. There are also additional increases for capital loss carryovers and other losses. The proposed allocation must be provided to the beneficiaries prior to the election.

The basis step-up still does not apply to property which is considered “income in respect of a decedent” which includes traditional IRAs and 401(k)s.

Option Two – Five Million Dollar Estate Tax Exemption

Elect to subject the estate assets to estate tax and obtain a basis increase for all assets of the estate. The estate tax exemption amount was increased to $5 million for 2010 at a rate of 35% tax for assets over the $5 million. Continue reading »