Executors Face Difficult Decisions Under the New Tax Act

March 18, 2011Articles The Legal Intelligencer

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 extends most of the so-called “Bush era tax cuts” into 2012. The 2010 act increases the unified exemption for decedents dying in 2011 or 2012 for estate tax purposes to $5 million and reduces the top estate tax rate to 35 percent.

Executors of estates for decedents dying in 2010 face a special burden imposed by the 2010 act. Such executors must first decide whether to elect out of the imposition of the estate tax after a thorough analysis of both the estate and income tax consequences of such an election. The decision to elect-out of the estate tax results in additional problematic decisions that must be made with respect to the allocation of basis among estate assets.