Estate Tax Replaced in 2010 with Capital Gains Tax

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Wall Street Journal – Why No Estate Tax Could Be a Killer - 02/13/10 “Congress shocked everyone by letting the estate tax lapse on Jan. 1.” “Now, here is the real stunner: For many, the lapse actually will raise taxes.” “Under last year's law, estates up to $3.5 million, or $7 million for married couples, were exempt from federal tax.” “This year that law has been replaced by a fiendishly complex levy raising taxes on the assets of those with little as $1.3 million.”

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Wall Street Journal – Why No Estate Tax Could Be a Killer - 02/13/10

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Federal Estate Tax and Capital Gains Tax Implications in 2009 Example

Mr. Jones - $9,000,000 Estate Stock Portion Original Cost Realized Gain Capital Gains Estate Tax of Estate of Stock on Stock Sale on Stock Sale on Stock $1,200,000 $200,000 $1,000,000 $0 $540,000 Mr. Smith - $3,000,000 Estate Stock Portion Original Cost Realized Gain Capital Gains Estate Tax of Estate of Stock on Stock Sale on Sale on Stock $1,200,000 $200,000 $1,000,000 $0 $0

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Federal Estate Tax and Capital Gains Tax Implications in 2010 Example

Mr. Jones - $9,000,000 Estate Stock Portion Original Cost Realized Gain Capital Gains Estate Tax of Estate of Stock on Stock Sale on Stock Sale* on Stock $1,200,000 $200,000 $1,000,000 $150,000 $0 Mr. Smith - $3,000,000 Estate Stock Portion Original Cost Realized Gain Capital Gains Estate Tax of Estate of Stock on Stock Sale on Stock Sale* on Stock $1,200,000 $200,000 $1,000,000 $150,000 $0 * Note: the $1.3 million federal capital gains tax exemption was utilized with the other assets.

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Federal Estate Tax and Capital Gains Tax Implications: 2010 vs 2009

Mr. Jones - $9,000,000 Estate Heirs Pay $150,000 in Taxes in 2010 versus $540,000 in 2009 Heirs Comparatively Save $390,000 in Taxes in 2010 Mr. Smith - $3,000,000 Estate Heirs Pay $150,000 in Taxes in 2010 versus $0 in 2009 Heirs Comparatively Lose $150,000 in Taxes in 2010

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Wall Street Journal – Comments - 02/13/10

“Lest we forget, state estate taxes are very much alive and 'killing' estates. Despite the temporary disappearance of federal estate taxes, many states have retained draconian state estate taxes.”

“Many states have state estate tax exemptions that are drastically lower than both the former federal estate tax exemption and the current federal exemption for capital gains. With so many states running unprecedented deficits, those without state estate taxes may soon initiate them.”

“Fortunately, there are still a number of estate planning tools that are flexible enough to avoid both capital gains and the very likely return of estate taxes.”

- Aaron Skloff, AIF, CFA, MBA - CEO - Skloff Financial Group

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Aaron Skloff, AIF, CFA, M BA Chief Executive Officer Skloff Financial Group

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