This is a very good and very important question. I can't even pretend to be cynical enough to guess at the answer. Are you aware of this? If you are not, you have exposed your family to severe financial penalties.
How did this come about? It is the result of Congress's failure to extend the estate tax exemption and unlimited marital deduction into 2010. I will cover this in greater detail in future articles, but suffice it to say, this has created a financial and tax disaster for surviving spouses and children.
For the last 30 years the bedrock of estate planning has been the unlimited marital deduction. Since 1981, spouses could take comfort from knowing that there would be no estate tax at the first death between spouses. The estate tax burden was shifted to the second death. Starting January 1st of 2010, this is no longer the case.
Now the surviving spouse is faced with a new death tax that must be reckoned with in every case because there is no marital deduction. The federal estate tax has been replaced with a brand new tax on inherited assets. This is because the basis step up that occurred at the decedent's death is gone. Again, I'll get into more details in later articles. Now the surviving spouse must calculate basis in the assets of their deceased spouse and do complex and expensive tax planning at the first death.
Since most surviving spouse are women, this is a highly discriminatory new tax. While you ask a good question, "Why did Congress decide to take money away from widows and orphans"? I am sorry to say that there is answer, good or bad.
Stay tuned as we get into greater detail about Congress sticking you with the largest lower and middle class tax increase and boondoggle in U.S. history.
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