Monday, February 01, 2010

Heckerling Estate Planning Conference

Neil and I just returned from Orlando Florida where we spent the last week listening to the "experts" regarding the current status of the estate tax and what Congress is planning to do.  As you know, from my previous blog, Congress did not act prior to December 31, 2009 and therefore we presently have no estate tax for people dying in 2010.  Unfortunately, the experts pointed out the problems with regard to the estate tax suspension for one year but were not able to add any insight as to what Congress may do and when they may do it.

However, they all seem to suggest that if Congress does not act within the next month no legislation will take place until after the mid-term election in November. 

The next issue that they discussed was the constitutionality of a retroactive reinstatement of the estate tax law, for people dying in 2010.  The general consensus is that since this is not a "new tax" it would be constitutional.  Although they all believe that if the tax is made retroactive to January 1, 2010, there would be a number of law suits brought to challenge it.

Married clients, who had standard credit shelter wills, face special problems if they die in 2010 without the tax being retroactively reinstated.  This results from the standard language that establishes the credit shelter trust which is based upon the maximum amount to create the minimum estate tax.  Since there is no estate tax, the maximum amount would be the entire estate of the first of the spouses to die.  This could create undisireable results for the survivor and their children.  Therefore, it is important that elderly and infirmed married couples review their wills with competant counsel to avoid problems if one of them passes in 2010 and there is no estate tax.

Finally, the suspension of the estate tax has brought with it "carry-over" basis, which itself creates issues.  For example, it is unclear as to whether carry-over basis only applies to assets sold in 2010 of an individual that died in 2010.  The law provides that the estate tax and "fair market value" basis returns in 2011 as if the 2010 provisions "never applied."  Does this mean that if an individual died in 2010, with no estate tax, and assets are sold in 2011 and later years the basis for those assets are the fair market value on the date of death or alternate valuation date?

There are many issues outstanding .  This may be the first time that the phrase "it is what it is" has no meaning at all.

As always we are here to help you and your clients muddle through this maze.