Understanding and Reacting to Estate Tax Changes in 2010

Yesterday CBS Money Watch featured an informative and comprehensive article entitled Estate Tax: What You Need to Know for 2010.  The article first explains the basic estate tax changes in 2010: a decrease in the gift tax rate, the repeal of the estate and generation skipping transfer tax, and the requirement that heirs use the price paid for an asset when computing possible tax liability.

The article also provides the following issues to consider if the possibility of a retroactive estate tax for 2010 is not resolved relatively quickly:

• Organize records than will show the cost-basis of potentially inheritable assets for computing an heir’s tax liability.
• Review your estate planning documents for evidence of a bypass trust or other language that depends on the existence of an estate tax.
• Consider taking advantage of a lowered gift tax rate and the absence of a generation skipping transfer tax, knowing that these taxes could subsequently be changed to your disadvantage retroactively.
• Update your estate plan in general.

See Deborah L. Jacobs, Estate Tax: What You Need to Know for 2010, CBS Moneywatch, Jan. 5, 2010.