Estate Tax, part 8

Now that 2010 is almost over, it seems that there is virtually no chance that the Estate Tax will be changed for this year. (Nothing is impossible, but it does not seem likely.)

There is no estate tax for 2010, but if heirs sell assets they inherit, they could incur a capital gains tax. This is because inherited assets will be valued at their original cost (or other basis) value rather than at the fair market value as of the date of death. However, for most people this will be offset by a $1.3 million step-up in value (up to fair market value) available per estate. Assets inherited by a spouse get an additional $3 million step-up in valuation.

The estate tax for 2011 is yet to be determined. It is scheduled to revert back to 2001 law, but Congress will most likely change that, as no one wants 2001 to come back.