Seven things 2010 heirs need to do right now

Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbour. Catch the trade winds in your sails. Explore. Dream. Discover.

- Mark Twain

The “no estate tax” situation is causing a ton of confusion…still. It seems that every week brings with it different news about how Congress plans (or, um, doesn’t plan) to deal with this situation.

I’ve been receiving questions from clients and friends about how to handle this situation, and there are no “easy” answers. That said, however, I’ve put together a list of steps that inheritors should make sure they do this year, if they find themselves in that situation.

Feel free to pass this along to your friends!

Important Steps For 2010 Heirs

There’s been lots of chatter about the “windfall” situation 2010 estates find themselves in this year, with the lapse of the estate tax.

Here’s the problem–this may not be the case. It’s a bit of a technical issue, and one that should be handled in consultation with a tax professional, but this is the long and short of it:

Before this year, heirs valued inherited assets at the fair market value at the time of the decedent’s death. This year, heirs must use the decedent’s basis as their own when computing income taxes owed on the sale of these assets. The following seven steps can help guide you in this situation:

1. Have assets appraised. In order to determine your estate tax bill and where you want to allocate your $1.3 million carryover basis, you need to know the value of assets in your estate.

2. Locate purchase records. If you can’t prove the cost of an asset, the IRS will assume a value of zero and you’ll be responsible for capital gains taxes on the entire amount.

3. Delay selling appreciated assets. It’s possible that inheritors may be able to escape these carryover rules by delaying the sale of the assets until next year.

4. Postpone distributions. Congress could restore the estate tax retroactively. If the assets have already been distributed, paying the estate taxes will be very difficult.

5. Extend paperwork deadlines. Just like an income tax return, you may be able to extend the deadline for the carryover basis reporting paperwork to October 15.

6. Apply the basis allowance fairly. Don’t apply it to particular assets that will benefit one beneficiary more than another.

7. Guard against an executor’s added risks. If beneficiaries disagree with the executor, the executor should do what they ask, but get the beneficiaries to sign a document releasing the executor from liability.

Here’s an article which goes into greater detail for you:

http://www.forbes.com/2010/08/23/estate-tax-carryover-basis-capital-gains-personal-finance-deorah-jacobs.html

I’m personally dedicated to the success of your family–and your peace of mind! Can other lawyers say that?