US Estate Tax Update
The lack of federal estate tax in the US for those who died in 2010 was the talk of many blogs and news reports for much of last year. In a recent statement from the IRS, Executors for such estates have been given until November 15, 2011 to make a decision regarding the taxes to be applied to the estate they are administering.
The option allows the Executor to skip paying an estate tax, or to pay tax with a $5 million per-person exemption and a 35 percent top rate, the same as applied in 2011. On its face this may seem like an easy decision, why pay taxes if it’s unnecessary, but the choice to pay tax may bring with it long term benefits for the beneficiaries of the estate. By incurring the tax, the Executor allows for a transfer of certain assets at a stepped up basis, creating a significant potential benefit to the beneficiaries. If the taxes are not paid by the Estate, significant capital gains could remain owing on certain assets, potentially impacting the beneficiaries negatively.
Complicating this choice are administration issues relating to the forms related to filing. It is anticipated that the required forms will be released in the early fall, still giving the Executors time to file. Certainly, Executors will be considering their fiduciary obligations and the various financial implications for the estate very closely in the coming months.
Even north of the border, where most of us aren’t directly affected by the choices plaguing American Executors, the fiduciary obligations and issues facing Executors are similar. If the choices made by the American Executors make their way to the courts, we’ll be paying close attention.
Until Tomorrow,
Nadia M. Harasymowycz - Click here for more information on Nadia Harasymowycz.
