Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Monday, October 26, 2009

More on the Unknown Future of the Estate Tax

Estate tax Congress could extend the 2009 estate tax system into 2010 rather than allowing the estate tax to lapse. But, the estate tax exemption is set to return to $1 million in 2011, which means that extending the current $3.5 million exemption rate beyond 2010 would be counted as a revenue loser.   

Alternatively, Congress could allow the estate tax to expire as planned.  Laura Saunders, in Will the Estate Tax Disappear?, WSJ, Oct. 23, 2009, writes the following regarding this option:

At issue is the "step-up in cost basis" that all assets receive when an owner dies. The way the law is currently written, if the estate tax goes away, so does the step-up in cost basis . . . .

If Congress fails to extend the current system for 2010, then at the owner's death all assets would retain their original cost, called "carry-over basis." . . .

To be sure, the 2010 law as written gives each taxpayer $1.3 million worth of "free" step-up at death, but this is a far cry from the unlimited basis step-up under current law. Married couples get an additional $3 million at the death of the first spouse, heavily favoring them over individuals. 

Special thanks to Hani Sarji (LL.M. Candidate, New York Law School) for bringing this to my attention.


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