Several new and different provisions were included in the 2010 Estate Tax Law. One trickled down to much smaller estates. A brand new form was designed to report a much more complicated set of decisions that an executor had to make. Earlier laws generally provided that the income tax basis for assets transferred to beneficiaries from an estate was their “fair market value” on the sdate of death, or six months later if it would reduce the liability for estate taxes. However, the 2010 law provides that only $1,300,000 in value of assets can be “stepped up” to fair market value from decdeent’s basis. If property is left to a surviving spouse, another $3,000,000 can be stepped up. All other assets retain the basis of the decedent which may create large capital gains when sold.
The new form is to be filed by the executor for decedents dying only in 2010 to inform each beneficiary of the basis assigned to the assets they received with a copy to the IRS for their information. There will be major changes in taxing estates in 2013, and limiting the amount of value increase will probably be a popular idea with lawmakers. This law extends the time for maintaining basis records back to the death of a person’s spouse, or back to the acquisition date of any asset owned for decedents in 2010.
So be sure your executor is aware of all changes in the laws and keep your records. Help your executor out before hand by identifying the basis of all your own assets. If you were a beneficiary of a 2010 decedent make sure you have a copy of the Form 8939. Be certain your executor knows where you file your records. Identify appraisers for assets not easily valued such as jewelry, coins, stamps and household goods.
This information was provided by Clayton Tuggle, CAP, CFP. Tuggle & Russell, LLC