The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Tax Relief Act) provides major income tax relief to taxpayers by extending tax benefits that were scheduled to expire in 2010. The Tax Relief Act also provides generous changes to the estate tax, including a $5,000,000 exemption and an election to apply the new laws to 2010.  One particularly important addition is the simplification of estate tax planning for estates of decedents dying after December 31, 2010. As a result of this change, the executor can elect to transfer any unused exemption to the surviving spouse.

Prior to 2010, in order to take full advantage of the estate tax exemptions of each spouse, estate planning for married couples involved setting up trusts that were created at death. If an estate plan was not set up, or was not set up properly, or errors were made in the administration of it, then part or all of the exemption of one of the spouses could be lost. This new legislation would seem to provide relief for these situations; however, the executor does have a more important role, as it is the executor who must make the appropriate election.

It is reassuring that Congress is thinking in terms of simplification and relief for estate taxes. If Congress can repeal the AMT, they have a real shot at tax simplification within the next few years.

Posted by Rick Kellner, CPA
Drake Software, Education