2010 — An Estate Tax Odyssey

Although most would probably place the chances at less than 50% that the year 2010 will bring a repeal of federal estate ax and its companion carryover basis, it is far from impossible.  It seems prudent to plan for repeal of federal estate tax and carryover basis now by having a decedent’s estate planning documents structured to maximize flexibility and savings.  In addition, married clients need to decide how much should pass into a nonmarital deduction trust and how much, if any, should pass to (or in a QTIP trust for) the surviving spouse.  Although from an overall perspective it seems appropriate to minimize what the survivor inherits if there is no estate tax, the carryover basis provisions suggest a sizable disposition to the spouse (or, perhaps, better yet, to a QTIP trust) to take advantage of the $3 million spousal increase in basis rule under Code § 1022.  Also, executors/personal representative should be specifically authorized to make such allocations of basis increase as they think best.