Wednesday, September 22, 2010

Nightmares for Heirs of Descedents from 2010

This year's estate planning rules are really messing a lot of family's up. There is still the question if the unusual rules for 2010 only will remain in effect or if legislators will do something before the end of the year and make it retroactive to Jan 1, 2010. This is causing a lot of lawyers to freeze estates of those who have passed away this year because they don't want to do something that can't be reversed. The following is an exerpt from a Financial Advisor article that shows that even the IRS has not issued the forms required to file an estate tax return. You would think someone whould have been all over this by now but it is just one more way our government is dropping the ball. They should be ashamed.

"The prospect of a retroactive estate tax also plays into how quickly people are collecting on bequests. The worry is that lawmakers could levy such a tax, going back to the start of the year. In that case, a beneficiary who had already taken an inheritance tax-free might owe tax after all.

This possibility grows slimmer each day, but worries about it carry enough weight to have prompted some advisers to freeze wills until the end of the year.

Lauren Y. Detzel, chairman of the estate and succession-planning department at Dean, Mead, Egerton, Bloodworth, Capouano & Bozarth in Orlando, Fla., said a big concern are new income-tax rules to figure the value of inherited items. The task is to find the cost basis of an item for tax purposes, used to figure capital gains once the item is ultimately sold.

Under usual rules, the basis for heirs is what the asset was worth when the person died. For items inherited this year, though, heirs must "carry over" the basis, valuing the asset at its original cost.

When the estate tax lapsed, a new requirement was made for estates with non-cash assets over $1.3 million to notify the Internal Revenue Service of basis adjustments. The statute lists information that must be contained in the report but also refers to IRS regulations that haven't yet been issued.

Duncan E. Osborne, a partner at Osborne, Helman, Knebel & Deleery, said the newly required tax return hasn't even been issued yet. With the possibility the law may change and no clear knowledge of what tax filings need to be done, it is very difficult for attorneys to close an estate, he said.

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