January / February 2010 Issue

Repeal of the Estate Tax Issues

Congress, more specifically this time, the Senate, has again failed to enact any estate tax legislation. What does that mean today? The estate tax is repealed for 2010—maybe?

The Senate may attempt to pass some sort of legislation regarding the estate tax and make it retroactive to January 1, 2010, which may or may not be unconstitutional. Rather than speculate further, Bartsch Law will wait for their action and let you know what it means to you.

Should you worry?

Since I started Bartsch Law in 2004, I have been advising that when possible, given family circumstances, we use the simpler disclaimer trust. This trust requires that the first spouse act within 9 month of the first spouse’s passing to set up a tax planning trust, if needed, but it is optional. Our AB trusts do not disinherit the survivor regardless of the exemption amount, and we have used this strategy mostly with blended families, so it should still be a valid strategy no matter what congress decides to do. The real issue is basis allocation. Under the current law a single decedent’s estate will only be allowed to allocate $1.3 million of basis over their current cost basis up to the fair market value of the asset with an additional $3 million allowed to property going to surviving spouses. If your entire estate is under $1.3 million put away the aspirin, you’re covered. The rest of you may want to meet with your tax advisor and discuss any lurking problems and perhaps name the person or persons who will have the final say in the matter. Current law says the executor will have the final say. Let’s hope that does not require a probate petition, since most people create trusts to avoid probate.

Good News This Year - Roth Conversions

First, there are no income restrictions on who can convert their regular IRA to a Roth.

Second, you can recognize the conversion in total in 2010, or ratably in 2011 and 2012. If you are thinking about doing this, I suggest visiting your tax advisor before March or perhaps leave it until after April 15th (when the rush dies down).

Have a question?

If you have a question that is not answered, either in our newsletter or blog, then just click here and send us an email.

Coming up on Friday March 5th is the Bartsch Law Seminar on Estate Planning (Living Trusts).

Held at Las Positas College, many of your questions will be answered so why not register now to attend.

Final thought. DID YOU KNOW THAT.....

USE TAX: If you made purchases out of State or over the internet and did not pay sales taxes, the State Board of Equalization (BOE) requires you to file and pay use tax.

Watch for this question on your tax organizer.

Also, the BOE is requiring that individuals who earn gross income over $100K, but are not otherwise required to file sales tax returns, to register their business with BOE.

Call Bartsch Law (925) 456 6001