As we know, January 1, 2010, brought the beginning of a temporary period without a current federal estate tax. However, it also brought a year of tremendous uncertainty. Even a year ago, most people thought allowing the estate tax to be repealed – even for a year – unthinkable.
Now, there is uncertainty even as to whether there might be legislation that would reimpose an estate tax retroactive to the first of the year. There are increasingly strong arguments that doing so would be unconstitutional. Taxpayers have a right to be able to plan their affairs based on current law.
It is increasingly unlikely that Congress will act to change the law retroactively for this year because of the constitutional uncertainty. However, it is also unlikely that Congress will act in this area – even prospectively – because of the upcoming mid-term Congressional elections. It is likely that we’ll be stuck with the uncertainty of the current situation at least into November.
Meanwhile, there is a great deal of uncertainty regarding taxpayers who have already died in 2010. Those decedents get additional basis to allocate for their executors to allocate. But, it’s not clear how that allocation is to be done. Will there be a special return, like a Form 706-BA (for basis allocation). What will be the due date of that return? Conversely, will the basis allocation occur on the decedent’s final income tax return? It’s just not clear as yet. Let’s hope that the IRS will issue guidance with regard to decedents dying in 2010 in the near future.
The best advice for now regarding those who have died in 2010 is to do as little as possible in order to preserve the maximum number of options once the Service finally issues guidance. However, the clock is ticking. Come on IRS…..Give us some guidance!
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys
Phone: (800) 846-1555