by Geri McHam, The Estate Plan, Dec 18, 2009
The estate tax is still in limbo though the House passed an estate tax law, the latest from the U.S. Senate is that they will not grant an extension of the $3.5 million exclusion, so there will be no estate tax for 2010 until Congress decides what will happen.
Under the current law, in 2010 the capital gains tax on estates will apply to all but the first $1.3 million in inherited assets, including homes, stock certificates, stamp collections and livestock. Heirs who sell those assets would pay from 15 percent to 28 percent in taxes on any appreciation in value since the assets were originally acquired. This is a change from current law, where the cost basis resets to fair market value when passed to heirs.
Gift Threshold remains $13,000 - The amount that may be gifted each year to any one person without the need to file a gift tax return rose from $12,000 to $13,000 on January 1, 2009. The gift threshold of $13,000 will stay the same for 2010. For example, a married couple with four children will be able to give away up to $104,000 with no gift tax implications. Gifts must be made before the end of the tax year.
Charitable Donations from an IRA not yaxable as part of the large financial rescue package, Congress retroactively extended the IRA charitable rollover provision from January 1, 2008, through December 31, 2009. This reinstates the rollover exemption that was part of the Pension Protection Act of 2006. Previously, those wishing to make charitable donations using money in their IRA accounts were required to withdraw funds from their IRA and pay income tax on the withdrawal before they could take a charitable donation deduction on their annual tax returns. But under the new law, so long as the donation is transferred directly from a traditional or Roth IRA or rollover IRA account to an eligible public charity, the donor doesn't have to pay any income tax on the withdrawal. As far as the federal government is concerned, money donated to the charity simply is not income. But note that the transfer is no longer eligible for the charitable tax deduction, either.
Before January 1, 2010, you can convert a traditional IRA to a Roth IRA only if your adjusted gross income is less than $100,000. The income limit is lifted on January 1, 2010 at which point anyone will be able to rollover a traditional IRA to a Roth. Roth IRAs grow tax-free, but you'll have to pay taxes when you convert a regular IRA to a Roth. However, the tax bill can be spread over two years. For details on Roth rollover rules, click on this link to Kiplinger.com. For an article on the benefits of Roths for heirs, click here. Create long-term wealth, and utilize an IRA Trust to create the legacy and provide asset protection for your beneficiaries.