A client in Oklahoma died in January, [Jack Nuckolls of BDO Seidman] says, and had actually changed his will to anticipate the 2010 elimination of the estate tax. In many large estates, the traditional way of minimizing estate taxes has been to create a trust and place $3.5 million of assets -- the decedent's exclusion -- into that trust. That trust would not be taxed. The rest of the estate would go into a family trust and avoid taxation until the death of the surviving spouse. With no estate taxes, the Oklahoma person didn't need to shelter that initial $3.5 million because there is no estate tax. But in providing all his money in a single family trust, Nuckolls says, it looks like his estate will be exposed to higher Oklahoma state estate taxes than if the second trust had been established. Further, by not leaving anything to the spouse directly, this estate may not be able to qualify for the $3 million spousal exclusion on capital gains taxes. "It seems like we could be wasting $3 million," Nuckolls says.
Monday, February 15, 2010
A Cautionary Estate Tax Tale
From Remember the Estate Tax? It's Still gone in U.S. News and World Report:
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1 comment:
Nuckolls should double check his math.
The lost $3 million basis step-up translates to at most $450,000 in unnecessary capital gains taxes. Compare this to an unnecessary estate tax $1.5 million or more at the spouse's death, depending upon her other assets and how much the assets grow in value.
What's more, according to your earlier blog post pointing to a Forbes article, Oklahoma has no estate or inheritance tax! Was Forbes wrong, or is Nuckolls trying to make a name for himself with incomplete info?
Reminds me of the early early critics of Warren Burger's will who were ultimately proved to be fools.
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