In estate planning the estate tax is a very big deal, and the details of the tax are constantly changing so it is something that is an ongoing topic of debate. At the end of last year the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was passed and it included provisions that altered the estate tax parameters. Rather than the $1 million exclusion that would have been in place had this bill not passed it is now $5 million. And instead of the 55% rate of taxation that was scheduled the new measure calls for a 35% rate.
If you look at that last sentence again it states that there is a 35% federal death levy in place, but this is somehow being called “tax relief.” Many would say that the estate tax should not exist at all, and there are a number of good reasons for this. The first and best reason is the fact that it is an instance of double taxation. The assets that comprise your estate were accumulated using funds that you have left over after having paid income taxes, capital gains tax, property tax, sales tax, and a number of additional taxes that go largely unnoticed such as gasoline tax and liquor tax.
In addition it could be argued that it is unfair because only some people have to pay it. And even if you believe in some form of death tax for whatever reason, a tax that lops off somewhere between 35% and 55% of your legacy is extraordinarily excessive.
For these reasons many people are in favor of a repeal of the estate tax, and some of them are holding seats in the United States House of Representatives. There have been five bills introduced to the House that call for the repeal of the estate tax, so this idea is gaining momentum and it is possible that we will in fact see a repeal at some point in the future.
- Attorneys Want to Help - December 14, 2016
- Trusts and the Estate Tax - December 14, 2016
- What Is a Third Party Special Needs Trust? - December 14, 2016