Federal Estate Tax Law Continues to Be Dealt with by Congress on a Temporary Basis

The most recent tax law passed by Congress and signed by President Barach Obama on December 17, 2010 temporarily changed the federal estate  tax laws.  Decedents who die during 2011 and 2012 now have a federal estate tax exemption of $5,000,000, but that figure drops back down to $1,000,000 in 2013, so we can expect more political arguments over the federal estate tax in the near future.

Estates of decedents who died during 2010 will automatically be subject to the 2011 tax laws unless they file an election to be taxed under 2010 laws.  For most estates under $5,000,000, 2011 law will be beneficial because assets includible in the estate will automatically receive a step-up in basis for capital gains tax purposes.  An election can be filed to have the 2010 law apply to the estate, but the Internal Revenue Service still has not finalized the form, instructions, or due date.

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