Federal Estate Tax Update

The Federal Estate Tax laws have changed in 2010. There is no Federal Estate Tax for people who die in 2010. However, the 2001 EGTRA Act included Code Section 1022 to apply a capital gains tax to estates that meet certain guidelines. Normally, property is inherited with a stepped-up basis (stepped-up to fair-market-value). However, property inherited from a decedant dying in 2010 has a carry-over of the decedent's original basis with some adjustment for spouses and non-spouses. For married couples this can be a bit tricky because if they want to leave all property to their spouse at the death of the first of them, they need to give their spouse the property in a specific way through their revocable trust. The first to die spouse needs to leave their property to their spouse either outright or in a QTIP trust inside their revocable living trust. This is a big problem especially for those with old outdated trusts that do not include the proper language to death with the possibility of a spouse dying in 2010. In my office, we draft in and/or language just in case a client spouse dies in 2010. I have been drafting this way for years in anticipation that Congress would do just what it is doing right now-nothing. If you would like more information about amending your current trust to comport with this tax issue or you are interested in setting up your living trust, call me at (760) 448-2220 or contact me at info@geigerlawoffice.net.