Hi, my name is John T. Anderson. Welcome to my blog! I have been practicing law in California since 1975 and have been the Chairman of the Estate Planning and Probate Section of the Long Beach Bar Association since the mid-1980s. I'm also certified by the State Bar of California Board of Legal Specialization as a specialist in Estate Planning, Trust and Probate Law. On this blog, you will find articles written by me regarding estate planning and probate in California. Many of these articles address recent changes in the law and summaries of the Long Beach Bar Association’s Estate Planning and Probate Section meetings. I hope that you find these articles helpful. If you would like more information about me or my law office, please visit my website at or contact my office at 562.424.8619.

Friday, April 23, 2010

D. Michael Trainotti-- Estate Tax and Basis

Probate, Trust and Estate Planning Tidbits.
by John T. Anderson, Chairman
Certified Specialist in Estate Planning, Trust
and Probate Law by the State Bar of California,
Board of Legal Specialization

D. Michael Trainotti-- Estate Tax and Basis

The Long Beach Bar Association Estate Planning, Trust and Probate Law Section held a Brown Bag meeting, with standing room only as D. Michael Trainotti, Esq., a local Tax and Sophisticated Business and Tax Planner spoke on The Estate Tax Unified Credit-What Now? and Capital Gain-Hang-on To All Your Records (not the vinyl kind).  What Applies–Step-Up or Carry-Over?

You can e-mail Mike at and (a) get on his monthly e-mailer concerning tax issues primarily related to estate planning; and (b) request an e-mail copy of the 120 page article by Jonathan Blattmacher.  Practice in Estate Planning in 2010 by Howard M. Zaritsky is available for about $90 and discusses issues in planning with examples.

Will Rogers said he “doesn’t make jokes.  He just watches the government and reports the facts.”

Ronald Reagan said, “Politics is supposed to be the second-oldest profession.  I’ve come to believe it is very closely related to the first.”

A case that is being dealt with: An individual dies with a $22 million estate of primarily real estate and stock.  No estate tax (for now).  Step-up in basis for income tax purposes on appreciated property of $1.3 million.  The balance has carry-over basis and upon a sale will have income tax on the gain.

Formula clauses for A/B/C Trusts are based upon the existence of an Estate Tax and a Generation Skipping Tax which do not currently exist for 2010.

An incapacitated and dying client with a spouse, some community property and some separate property; and, his kids as successor Trustees has a very difficult and likely litigious situation.

$25 billion is raised with the Death Tax–A lot to you and me, but a drop in the bucket to Congress and the National Budget.  The fight over the estate/death tax is a money raiser for politicians.

People continue to die in 2010 and no-one knows what Congress is going to do.  The chance that a retroactive tax bill will be approved is possible.  As we pass April, the likelihood of retroactivity becomes less and less (but with Congress, who knows?)

No step-up in basis for IRD items (income with respect to a decedent).  An IRA is an example.

Community Property of $10 million.  Last year, both halves, with planning, got $3.5 million exemption.  This year, with a marital trust, the half belonging to the first spouse to die can get a $3.4 million step-up in basis.  Survivor’s half gets no step-up in basis.

So, how do you draft?  Do you notify clients with formula clauses in their Trust?

2010–Define the source of the assets. Decedent’s to Q-TIP/Marital Deduction ad provide for a Disclaimer to an Exempt or By Pass Trust.
2011–Up to $3 million: Q-TIP as minimum amount; By-pass as residual.

It is very mechanical.  Zaritsky’s book goes through the mechanics.  It is not written with community property in mind, so you must consider it.

Gifting and Generation Skipping: There is currently no Generation Skipping Tax (2010).  So you may want to distribute this year.  But, if you are the Trustee, you may want to hold money back.  If income distributes, it has to pay GST tax.

There is a song: “No One Knows, No One Knows.”

                John T. Anderson, Section Chair
                Certified Specialist in Probate, Trust and Estate Planning
                By the California State Bar Board of Legal Specialization

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