FAQs about the New Tax Rules for Executors for 2010: Estate, Gift and Generation-Skipping Transfer Tax Questions
Is the estate tax repealed for decedents dying in 2010?
Yes. We never thought we would be here but the indecision and inability of the legislature to reach anagreement is a win for decedents dying in 2010. Title V of the Economic Growth and Tax ReliefReconciliation Act of 2001 (“EGTRRA”) repeals the estate tax for decedents dying after December 31,2009 and before January 1, 2011. The estate tax is not repealed for the estates of decedents who diedbefore January 1, 2010; therefore, an estate tax return will still need to be filed for those estates.
Is the gift tax repealed for gifts made during 2010?
No. Title V of EGTRRA does not repeal the gift tax for 2010. However, the maximum gift tax rate fortaxable gifts is reduced from 45% to 35% for gifts made in 2010. Furthermore, EGTRRA broadened theapplication of the gift tax by treating certain transfers in trust as transfers of property by gift. For moreinformation, you should consult your tax adviser or go to the IRS Web site. Key words: Notice 2010-19.
Is the generation-skipping transfer (GST) tax repealed in 2010?
Yes. Another win. Title V of EGTRRA repeals the generation-skipping transfer (“GST”) tax on directskips, taxable terminations, or taxable distributions occurring after December 31, 2009 and beforeJanuary 1, 2011.
Should I file a Form 706 for a decedent who died in 2010?
No. Because the estate tax is repealed for decedents dying in 2010, no estate tax is due and there is noneed to file a Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. IRC§6018 no longer requires the filing of an estate tax return. In addition, the most recent revision of Form706, dated 09-2009, is applicable only to decedents dying after December 31, 2008 and before January 1,2010. There is no Form 706 for decedents dying after December 31, 2009.
Should I file a Form 709 for gifts I made in 2010?
Yes, if you made gifts that are subject to the gift tax, that is anything over $13,000. Because the gift taxwas not repealed, donors should continue to file a Form 709, United States Gift (and Generation-Skip-ping Transfer) Tax Return, to report gifts made in 2010. For more information, please contact your taxadviser.
Will Congress retroactively reinstate the estate tax for decedents dying in 2010?
We do not know. If legislation is enacted regarding the estate tax, the IRS will act swiftly to assess theimpact of such legislation and provide guidance to taxpayers regarding their tax obligations and filingrequirements.
Will the estate tax return in 2011?
Yes. Under current legislation, the estate tax repeal will “sunset”, effective January 1, 2011. Therefore,the estate tax is applicable to decedents dying after December 31, 2010.
What are the exemption amounts and tax rates for 2011?
Under current legislation, the exemption amount for estates and gifts is $1 million. For GST transfers, the exemption amount is $1 million with an inflation adjustment. Under current legislation, themaximum rate for estate, gift, and GST tax is 55%, with a surtax for estate and gift transfers between$10 million and $17,184,000. It is my guess that they will stick with the $3.5 million limit but we willhave to wait and see.
Will Congress change the exemption amount and rates for 2011?
We do not know. If legislation is enacted regarding the estate, gift or GST tax, the IRS will act swiftly toassess the impact of such legislation and provide guidance to taxpayers regarding their tax obligationsand filing requirements.
Dropping back down to a $1,000,000 exemption amount would affect a larger number of people and soit is something we need to watch. If, as I guess, it remains at $3,500,000, very few people in the countrywill end up having it be an issue. We will have to wait and see. Again.
Stay tuned.