The Financial Planning Association is urging members of Congress to retain the "step-up in basis" in any estate tax legislation that lawmakers consider this year. The step-up in basis is important because "If inherited assets are sold, heirs would pay tax on the value accumulated since they inherited the assets," says Bill DeReuter, assistant director of government relations at the FPA.
DeReuter says both Senators Jon Kyl (R-Arizona) and Max Baucus (D-Montana) support heirs getting a step-up in basis in any estate tax compromise that is reached. Kyl has proposed an $8 million exemption for individuals with the estate tax rate tied to the capital gains rate, which is currently 15% but reverts back to 20% in 2008, DeReuter says. Kyl's exemption is being challenged by some Democrats in the Senate, DeReuter says, who argue that $8 million is too high. The Senate is expected to vote on estate tax legislation at the end of July, "either on outright repeal or the negotiated Kyl-Baucus compromise," DeReuter says. Earlier this year, the House passed legislation to repeal the estate tax. DeReuter says it's "unclear" whether there are enough votes in the Senate to support permanent repeal.
FPA is now telling its members to contact their Congressmen and urge them to make sure the step-up in basis makes it into estate tax legislation.