March
2010

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Introduction

Just a reminder that the application deadline for the Multop Financial scholarship is approaching! Multop clients (tax or financial planning) can nominate students, whether family or friends, in all disciplines of study for the Multop Financial Scholarship. Our $2,000 Scholarship is offered each year to one student enrolled in full-time study at an accredited institution of the student’s choice.  The winner is determined by our Client Advisory Board, based on the application, essay and general impression.  Applications must be received by us no later than March 31st, 2010. For further details you can download the scholarship application from the link below.

Multop Financial Scholarship


Tax Tip – The 2010 Estate Tax Nightmare

You may have heard rumors that the “death tax” is gone for 2010 but don’t believe the hype.  While the federal estate tax may have lapsed for 2010 it is by no means a tax free year for estates.  It may be a good idea to review your will and estate plan this year, to avoid surprises down the road.  Estate planning saves money –it’s that simple.

The nightmare began with the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) which ratcheted up the federal estate tax exemption from $1 million in 2002 to an all time high of $3.5 million in 2009; estates valued below the exemption amount are shielded from the estate tax. During this period assets passing from a decedent received a new basis equal to the fair market value as of the decedent’s date of death.  The logic behind behind the automatic basis adjustment rule was to avoid double taxation of the same property to not only estate taxes but also capital gains taxes when the decedent’s heirs later sold their inherited property.

While Congress may have turned its attention from the lapsing estate tax to healthcare reform, it certainly didn’t forget about its slice of your estate pie.  With the unlimited exemption in 2010, Congress eliminated the automatic basis adjustment on all assets that heirs inherit from a decedent’s estate and replaced it with a modified carryover basis. Under the modified carryover basis heirs must unearth original cost and purchase data for every single asset, no capital gain forgiveness card for 2010.  However, there is a step-up provison that can be used for up to $3 million in assets passing to a surviving spouse and a separate $1.3 million for assets passing to other heirs. The step-up provision stipulates that heirs and spouses are only required to pay capital gains on the increase in value from when they inherited it to when it is sold. It should be noted that certain assets are not eligible for step-up; these include assets that generate ordinary income and include IRAs, annuities, 401(k) plans, certain stock options and other employee benefit plans.

Aside from the one year elimination of the automatic basis adjustment on assets, the unlimited estate tax exemption may also result in inadvertent disinheritance. Within most wills and trusts are formula clauses that reference the federal estate and generation-skipping transfer tax laws which provide a formula for calculating the distribution of assets based on exemption amounts.  Since exemption amounts expired in 2010, all assets may be unintentionally transferred to either the children or spouse, when in reality the decedent desired to have the exempt amount given to his/her children and the remaining estate given to his/her spouse.

Consider a decedent with $6 million in net worth and his will gives his heirs from his first marriage the “exempt” amount with the remaining assets given to his second wife.  If the decedent had died in 2009, when the exemption was $3.5 million, wife No. 2 would have been left with $2.5 million and $3.5 million would have gone to the heirs.  However, in 2010 the decedent’s heirs would have received $6 million with the widow receiving nothing.  This likely scenario could also adversely affect charitable beneficiaries as well.

So what steps should you take in 2010 to protect your estate plan? Phil Multop, CPA, CFP® recommends that if your spouse or parent passes away in 2010 you should contact your tax specialists as soon as reasonably possible.  The executor of the decedent’s estate is required to file Form 706 within nine months of the date of death and will be required to list the assets they wish for a stepped up basis –no small feat when you are already dealing with a death of a loved one.  Please note that this article only addresses federal tax issues, for more information on state estate tax contact us directly, (360) 671-7891 or your estate planning attorney.

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Upcoming
News & Events


Lifestyles & Events Page

March’s Lifestyle page will feature business owner and local veterinarian Dr. Giles Little.  We are also pleased to feature Tim and Janet Murphy’s two year sailing adventure.  From our staff, read about Tyler and Andrew’s recent trip to Superbowl XLIV in Miami.

March Lifestyles

Referral Credit for
Tax Clients

We want more tax clients just like you. Refer a new tax client and we’ll take money off your preparation fee! If you’ve been a client for five years or under you’ll receive a discount of $50, a client of five to ten years you’ll receive $100 and a client for more than 10 years you’ll receive $150 credit.  It pays to refer!


Tax Planning
2009 - 2010

Download the new
Multop Financial 2009 – 2010 Tax Planning Guide from our updated website.

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