Posthumously Conceived Children Can't Necessarily Get Social Security Benefits

The Supreme Court of the United States has just announced a fascinating decision.  In a unanimous opinion the Court sided with the Social Security Administration in holding that a child conceived posthumously (after the father's death), such as by way of preserved sperm, is not automatically entitled to Social Security benefits as a surviving heir unless the child is entitled to inherit from the father under state intestacy or inheritance law.  Simply put, such a child cannot rely solely on the fact that it is the genetic offspring of the father.  The child's right to receive benefits depends on whether state law would recognize the child as the father's child.  Since most state intestacy laws were enacted well before medical advances allowed for the preservation of the father's sperm and insemination of the mother by artificial means, this is an open question in most states that will require either legislative clarification or interpretation by each state's courts.

The case is Astrue v. Capato, docket number 11-159, opinion issued May 21, 2012.

Death and Taxes

Nothing is certain but death and taxes, goes the old saying. But combine the two and nothing is certain but uncertainty. The new year came without Congress extending the estate tax (the House voted to extend the tax, but the Senate didn't act), so for 2010 it is gone. It's scheduled to revive at a higher rate (55% vs. 45% in 2009) and lower exemption ($1 million vs. $3.5 million in 2009). Most commentators expected Congress to extend the tax in 2010. Most commentators were wrong.

2010 marks the first year since 1916 that a person can die without an estate tax. That is making for a lot of macabre jokes about doing in a rich relative. The truth, though, is 2010 might not be such a great year to die anyway. In the Internal Revenue Code there is a provision for "stepped up basis," which means that when property passed by inheritance, the basis (amount at which the property was acquired) was stepped up to the date of death. That meant, for example, if Uncle Harry owned real estate that he purchased in 1950 for $10,000 and it is today worth $750,000, the basis to the heirs became $750,000, saving a bundle in capital gains taxes. But this provision went away with the estate tax. So now the heirs are looking at a capital gain tax on $740,000, the difference between the 1950 basis of $10,000, and today's value of $750,000 should they sell. Assuming values continue upward, that taxable gain will only get bigger.