TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, May 7, 2010

Death Tax Lives in Estate Repeal for Heir Who Must Sell Assets

Following up on my recent posts (How to Protect Your Family From Estate Tax Uncertainty and The Costs of Estate Tax Dithering):  Bloomberg, Death Tax Lives in Estate Repeal for Heir Who Must Sell Assets, by  Ryan J. Donmoyer & Margaret Collins:

Blanche Christerson, an executive in Deutsche Bank AG’s private wealth management division, loves her 85-year-old ailing mother, Hedda Lark, of Manhattan Beach, California, and isn’t ready for her to die. Still, Christerson says, she and her mother are bothered that in discussing Lark’s estate, they wrestle with tax complications that didn’t exist just a year ago.

Christerson, 54, is responsible for managing her mother’s estate. The wealth adviser says she fears she may be one of about 60,000 Americans who the U.S. Congress’s Joint Committee on Taxation projects will be caught in a novel tax trap. Those who inherit estates worth more than $1.3 million this year face an expensive quandary caused by the repeal on Jan. 1 of the 94-year-old federal estate tax, Bloomberg Markets magazine reports in its June issue.

Under a little-noticed twist, these people will owe capital-gains taxes if they sell assets they inherit. And if their loved ones die in 2011, the levies are scheduled to be even higher. Under 2009 rules, which Congress may reinstate, many of them would have paid nothing.

“It’s really a mess for a lot of people,” says Christerson, who has spent much of this year so far counseling clients facing similar situations. “As heirs, we would have been better off under the old regime.”

Five months into a year that marks one of former President George W. Bush’s biggest tax-policy changes -- the end of what he called the death tax -- confusion reigns.

Estate planners and their wealthy clients are in purgatory, struggling with whether to spend tens of thousands of dollars to restructure wills, only to have to spend even more if the law is changed again.

See also Future of the Estate Tax, Bloomberg.com Article Captures the Confusion Caused by the Repeal of the Estate Tax.

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