How the 2010 Estate Tax Changes Affect Accounting

The federal estate tax was repealed by Congress in late 2009, but it will be back in 2011 at a new, higher rate. What this means is that an inheritance this year will not be subject to the federal estate taxes (of course, states often have their own estate taxes). For 2011, the first 1$ million will be exempt with the remainder burdened with a fifty-five percent tax rate. This is as it stands now.

The “now” is important. The federal government is in dire need of funding and some pundits have the White House and Congress looking to reclaim this lost revenue by passing a law that institutes retroactive estate taxes for the year 2010 (which would sure to be challenged in the courts). So what we do know about estate taxes this year is that there is little chance that it will be like 2009 or 2011. Makes it interesting, eh?

Given the scrutiny estates and trusts get from the government, estate accounting has always required professional attention. With the uncertainty in 2010, it’s even more imperative. If you are inheriting a $1 million dollar estate, this would be a wise time to review your tax records. Above all, keep your books in order with a professional accountant who has estate and trust accounting experience.