If carryover basis survives for 2010, individuals will need to maintain accurate basis records. Investment assets present far less of a concern than assets that may have been in the family for many years, such as closely held business interests, family real estate or valuable artwork and antiques. Clients should begin assembling records now to reduce the administrative burden on their fiduciaries.
Avoid Requiring The Sale Of Assets At Death
An estate plan may require the sale of assets upon the decedent's death. Requiring the sale of an asset may take an administrative burden off the beneficiaries or may be needed to fund devices, raise cash for administrative expenses and taxes, or avoid family disputes. The decedent might also be a party to a buy/sell agreement or other contract permitting or requiring the sale of assets upon his death. Under the law applicable until 2010, a provision requiring the sale of an asset by the executor could permit the expenses of the sale to become deductible for estate tax purposes, and generally do not have the potential to trigger substantial income tax because all assets included in a decedent's gross estate acquire a new basis equal to fair market value at death.
In 2010, a required sale of assets acquired from a decedent may trigger substantial income tax under the carryover basis regime. Accordingly, estate plans or contracts containing sale provisions or put and/or call rights should be reviewed to determine the potential income tax consequences under a carryover basis regime.
In conclusion, the public perception that the repeal of the estate tax represents a windfall is widely overstated. Instead, there seem to be many more pitfalls than planning opportunities. Conducting a current estate planning review is critical to avoid unintended consequences for your intended beneficiaries.
Diana S.C. Zeydel is a shareholder in the Miami office of Greenberg Traurig. She focuses her practice on estate planning for high-net-worth individuals and families.