Are you an executor of an estate?   The legal and tax ramifications can be daunting.  However, Congress has provided some relief from the burden of taxation. Significant provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (the “EGTRRA”) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the “JGTRRA”) were scheduled to expire at the end of 2010. With the signing of the Jobs Creation Act of 2010, these provisions have now been extended through the end of 2012.

Some of the provisions pertain to Estate Tax.  From the December BDO Alliance USA ‘BDO Knows’ article ,  here is a brief summary of what is covered under the extension:


Prior Law

The EGTRRA phased out the estate and generation-skipping transfer taxes over a period of several years, with both taxes fully repealed in 2010. The EGTRRA also provided for carryover basis rules for assets passing through certain estates in 2010. In addition the EGTRRA decoupled the gift tax from the estate tax.   Under the EGTRRA provisions the gift tax rate is 35% in 2010, with a lifetime credit equivalent to an exclusion of the first $1,000,000 of otherwise taxable gifts.   All these provisions expire at the end of 2010, at which point the estate, generation–skipping transfer, and gift taxes would have been reinstated at pre-2001 levels. A rate of 55% would have applied to transfers subject to both the estate and gift tax, with the lifetime credit equivalent to an exclusion of $1,000,000.

What this means:   Transferred estates won’t be subject to Gift Tax as well.


Estate Tax Provisions and the EGTRRAReinstatement of Estate Tax/Generation Skipping Tax

The Act reinstates the estate tax for 2010 through 2012 with a top tax rate of 35%, but with special transitional provisions in effect for 2010 only.  The individual lifetime credit amount is increased to an equivalent exemption of $5 million ($10 million per couple). The carryover basis rules are eliminated beginning in 2011.  For estates of decedents dying in 2010, the estate can elect to either apply the new estate tax provisions of the Act or apply the carryover basis rules of the EGTRRA and pay no estate tax. The generation-skipping transfer tax is also reinstated effective for 2010-2012 with a $5 million exemption amount for each of these years.   The flat tax rate for GST transfers will be 0% for 2010 and 35% for 2011 and 2012. The zero percent tax rate for 2010 eliminates any tax on GST taxable transfers occurring in 2010.  Irrevocable transfers to trusts in 2010 that have a potential for future generation skipping transfers post 2010 would be subject to the GST tax at that time depending on the inclusion ratio of the trust.

What this means:   The estate tax is still 35%, but there are limits.


Modifications to Gift Tax

The Act reunifies the gift and estate taxes by allowing taxpayers to use their same $5 million lifetime equivalent exclusion amount against taxable gifts, as well as amounts passing through their estates, for gifts made during 2011 and 2012.  The top tax rate for gifts is also set at 35% for 2011 and 2012. The top rate for gifts for 2010 remains 35% and the lifetime equivalent exclusion also remains at $1 million.

What this means:   The same gift and exclusion limits for estate transfers will still be in place through the extension period.


Transfer of Exclusion Amount to Spouse

The Act allows the executor of a deceased spouse to transfer any exclusion amount that is not used by the deceased spouse to the surviving spouse.

What this means:   The same rules apply for surviving members.


Sunset Provisions

The changes made by the Act to the estate, generation-skipping transfer, and gift taxes only apply through 2012.  In 2013, the provisions prior to the EGTRRA, including the 55% maximum rate and $1 million exemption equivalent, will be reinstated.

What this means:   By 2013, this all changes back to normal.

Particularly as we file for our 2010 taxes, you may not be aware of these changes.   Our Estate and Trust services with Blackman & Sloop, as well as BDO can assist with your needs.

About Blackman & Sloop CPAs, P.A.:

Blackman & Sloop is a full-service CPA firm headquartered in Chapel Hill, North Carolina and is actively involved in auditing, taxation, management consulting, financial planning, and related services. The firm directs a large part of its services toward providing management with advice on budgeting, forecasts, projections, financing decisions, financial analysis, and tax developments. The firm also performs review and compilation services and prepares not-for-profit, corporate, individual, estate, retirement plan, and trust tax returns as well as technology consulting services regarding installation and training on QuickBooks. Blackman & Sloop provides services in Raleigh, Durham, Chapel Hill, RTP, Hillsborough, Pittsboro, Charlotte, and the rest of North Carolina. To find out more please visit

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