The estate tax is dead … or is it?
The federal tax on transfers of wealth from estates has been with us since the passage of the Revenue Act of 1916, although there were similar temporary levies around the time of the Spanish-American War. This tax came to an end, albeit temporarily, on December 31, 2009.
How did this happen? In 2001, Congress passed legislation gradually raising exemptions and reducing tax rates, resulting in a 2009 estate exemption of $3.5 million and a 45% estate-tax rate on amounts over the exemption.
The plan called for a “sunset” of the estate tax in 2010, followed by a “sunrise” in 2011 of a 55% estate-tax rate and $1 million exemption. On top of this, the generation-skipping tax on transfers has lapsed completely.
Many observers were certain that before the end of 2009, Congress would either set up a new rate and exemption scheme, or just vote to continue the current 45%/$3.5 million structure for an additional year. They didn’t do either.
There are discussions about passing a retroactive provision to cover at least 2010, but the path is not yet clear. Leaving aside the often vitriolic discussion of the impact of the estate tax—or any tax—there’s no question that, with the estate-tax sunset, uncertainty reigns.
The net effect is that there could be some nasty surprises in store for some taxpayers at a time when they’re already grieving for loved ones, though there could be windfalls as well. This probably will all get straightened out soon … but, again, that was the sentiment last year.
What should you do? Thoughtful, deliberate actions are preferable to snap decisions. If you’re concerned, call your tax and legal advisors for guidance. They may say all you can do is wait.
My family paid more than $5million in estate taxes last year. My grandfather sold the first peice of land 22 years ago and never had $5million at any time in his life. He spent $1.2 million caring for my grandmother at home for 11 years.
Because the estate is taxed on it’s “fair market value”, not “cash” or “profits” it kills small landowners who might have land in a growing market. Our best estate plan still left us $500k short. Our land appreciated faster than the estate plan could keep up.
The money that the IRS took from my family in death taxes would have kept our family business operating without a hicup for the next 10 years. We could have built more than 2000 homes and kept hundreds of folks working. Only now the banks have shut down lending on home construction even in the best housing markets in the nation. In a nutshell the GOVERNMENT took our money, gave it to the banks and now the banks won’t even let us borrow it back.
My family ranch in Wyoming Is owned by a llc. My mother was the own of thos ranch until 5yrs. ago we made it a llc. and each yr. she give each of us seven kids a 35000.00 dollar share in the the ranch. She 92 yrs old. The ranch value is in the 10-15 million dollar range. Upon her death what kind of death tax liablity are we going to have. we each have about 150000 dollars in share asa of 2009. what is the best plan for us to reduce the death tax thanks
I am against the estate tax for the following reasons:
1. It is anti-American. The actions of indviduals to accumulate wealth has helped make this country the most prosperous in the world. Everybody benifits when wealth is invested in the private sector.
2. The indviduals that accumulated wealth are role models. In many cases they lived their life below their means- never needing or wanting a bailout. Their goal was to better their family’s future. They beleive that they should have the right to share their wealth with who they please.
3. The DEATH TAX is inherently evil. It occours when someone dies. This is at a time of THE greatest personal loss for a family. When the family must pay money to a goverment entity because of a death–it magnifies the loss with a discrace to what their life represented.
4. The wealthest people are patriatic and often generous. They love their country. They made it here and they wish to benifit the USA in their own way. They think they know best how to do this.
The estate tax has two purposes. 1)generate revenue for the government 2) limit the consentration of wealth . I guess it’s dependent on your prospective. Where I’m from a 3.5 million dollar exemption would not kill small landowners. But the estate tax might allow some of us to become small land owners if the 10-15 million dollar farms and ranches are sold.
It is not a “death tax,” but a tax only on large estates. I understand that it effects only 0.04% of the people. England did not hav such a tax, and that allowed the great fortunes to be passed on for hundreds of years. This held England back from becoming a true democracy until the 20th century. We need to think of what is good for our whole society.
There is no basis for taxing a persons lifetime accumulation of wealth. It is not income. It is the result of individual actions that supply capital for capitalism. It is better to separate the capital gain element and tax that. That is what the current law attempts to do. The estate tax is repealed however the step up cost basis it limited to the first 1.3 million in assets. This approach is reasonable. When gifts of priced assests are made the basis is carried over. When a person dies the same basis can be carried over. If there are not adaquate records than zero can be used for the cost basis. The 1.3 million exemption insulates most people from record tracing, allthough it could be increased. Death and gifting should not be taxable events. It is an invasion of personal liberty that has no moral basis. The estate tax and the gift tax should be permanatly repealled . Recipients of inherited and gifted assets know best how to managed capital, not the federal government. Families and small businesses would be allowed to continue to prosper themselves and the country.
One of the reasons that our country is in it’s current economic mess is that there has never been any real incnetive to save. When a person works, the pay income tax. If they save a portion of their income and invest it, should that investment increase in value, the government taxes it. When the person dies, if they have a net worth (2011) of over 1,000,000, they will be hit with taxes again. Our government should encourage saving/investment, not discourage it.
The estate tax definitely has a place in our society. The issue is not just what is good for the individual but the long term effect on society. I believe that having no estate tax would further concentrate wealth and power with a relatively small number of families-just like Mexico. Some farmers and ranchers seem to feel that they have a god given right to their family land. That land was here long before their family owned it and will still be here after they are gone. As Warren Buffet said- His family would inherit enough so that they would not have to worry about food and shelter, but not so much that they wouldn’t have to work. There must be some level of estate tax exemption that would reward success, but not strangle future generations of less fortunate individuals.
We always hear complaints that the people of this country do not save very much money. Yet the laws are skewed to punish the savers and reward the spenders!!
Everybody hates those people who make just a little more than they do- if you make $85,000 a year, then the guy who makes $125,000 is a pig.
If you have an estate of more than $3.5 million- lets say $5 mil- to give to 15 children, grand children and great grand children; and that divides out to $333,000 each, then it must be taxed so that they don’t buy up whole country.
May 7, 2010
I think Congress needs to work late a few nights and reinstate the Federal Estate Tax Exemption at the 3.5million dollar level where it left off. Equally important, Congress needs to reinstate the “Step-Up,” allowing the passing of houses, businesses, investments, to beneficiaries at their present value, free of additional monetary grief on top of the grief that comes from the loss of a parent.
It is certainly impossible to do any estate planning when the law is not clear, and it is too costly to run back and forth to lawyers. Something more permanent needs to be put in place.
President Obama mentioned this area during his campaign. He needs to see that this work gets done, and it needs to get done quickly. It was supposed to be addressed by the end of 2009.
Families that have accumulated a degree of wealth, by living under their means,
should be free to pass their wealth, without consequence, to their young ones. With what our children and grandchildren will have to face in the future, our generation should be permitted to leave something to them to help them get through it.
Congress, how about giving us a reason to try to improve our lives and the lives of our family. How about taking care of the needs of the people. Some direction, please!
Congress must do something to clarify the estate tax law. Is the tax limit for 2010 3.5 million or has it gone back to 1million already? It is ridiculous to leave everyone in limbo when it comes to estate planning. I think there should be a reasonable tax on huge estates. They find loopholes anyway. Also it will allow those people to donate to charities to avoid tax. 3.5 million to 5 seems reasonable in this time of inflated worth. Tax has already been paid on that money. If in a IRA etc. it will be paid with the RMW. Agreed, some direction,please!
The estate tax situation shows us that our Congress is negligent and derelict in its duty to this country by not passing an estate tax plan for this year. Clearly, fiscal responsibility is foreign to our government!
The estate tax boils down to two distinct political party views. If you believe that the government should tax and take money from those individuals that have worked hard to accumulate some wealth and then redistribute that money as the “government powerful” descides, who the winners are and who the loosers are, then vote for democrats. If you believe that individuals who have worked hard and have accumulated wealth should have the right to determine who should receive their money ie charity, family or whomever, then vote for republicans. You will get what you vote for. Liberty on the republican side or equality of wealth on the democrat side…which do you want?
I personally believe there should be no estate taxes since we all pay taxes throughout our working lives, but never 45 to 55%, which makes us worth more to the government dead than alive. No estate taxes will probably never happen, so as a compromise I would propose the following:
1. Reinstate the 3.5M tax exemption, but adjust it for inflation each year, and make it permanent. Leave whichever party is in power out of the mix.
2. Any balance over and above the 3.5M exemption, adjusted for inflation, would be taxed at the current capital gains tax rate in effect at the time, with a cap at 49%. The government should never get more than the beneficiaries in my opinion.
3. If the assets over 3.5M exemption are non-income producing such as land, then estate taxes would be deferred until sold. Income producing assets would be taxed on the income produced, and then capital gains tax when sold.
4. To be fair, tax deferred assets such as retirement accounts would still be taxed as ordinary income when distributed, or continue to be allowed to grow tax deferred, the same as the deceased owner would have paid. The RMD would die with the owner.
My father left me with some words of wisdom that I have designed my personal estate plan after. I quote “Always leave the next generation of family better off than the last”. Handing over 55% of my estate to the IRS makes living up to this quote very difficult.
I sincerely hope a fair estate tax plan is adopted soon…
The Estate/Gift Tax should both be terminated permenantly. They are both immoral. Dying and Gifting should not be taxabe events. The current law allows for 1.3 million inheirited capital GAINS to be untaxed. Thats a lot of gains. If inheirited assets are sold that generate gains above 1.3 million or 4.3 million to a spouse then they would owe capital gains taxes at 15-20 percent. That seems fair.
It is estimated that 60,000 individuals would be affected this year by the new law. It is conceivable that it could bring in more revenue than the Estate/Gift taxes did.
I am all for the estate tax. Give me more money when I live by taxing those born with a silver spoon. People who earn their money should keep more of it, and those who inherit it should pay up to the IRS.
There shouldn’t be an estate tax. If I earn and save money, pay taxes on money, and build wealth on money, then my heirs shouldn’t have to pay taxes on it when I die. Taxes have already been paid for. It is a double dip by IRS on it as far as I’m concerned, and that shouldn’t be allowed by my representation. It is wrong.
WHAT IS THE CURRENT AMOUNT YOU CAN RECEIVE WITHOUT GETTING TAXED ON. I WORKED HARD FOR MY MONEY AND WORK LIKE TO MAKE SURE WHAT IS LEFT IS GIVEN TO MY CHILDREN AND GRANDCHILDREN AND NOT HAVE THEN TAXED TO DEATH.
It is September 5th and our Congress & President are playing politics with us…as usual. This is so very apparent in that they have done nothing to clarify to American families what will happen on Jan. 1 to our estate tax laws. We can’t plan, because THEY refuse to plan. This is not leadership or responsibility. This avoidance, cowardice, discord & frustrating politics!
Returning to a $1 million exemption for a lifetime of working, saving & paying all kinds of taxes, ignoring 10 years of inflation…seriously?! If this country re-elects this kind of leadership, we’ll all be broke in a broken nation in another 10 years.
There should be no estate/gift tax. It sends exactly the wrong message. That being if you do everything financially right in life such as: Save, Invest, start or grow a business, pay taxes on what you accumulate and on property you own. After doing this you or your family are punished with a punitive tax is a discrace to this country.
When I hear the term “death tax” I am reminded that the military draft, by which our Government called me into the military, was once considered a tax on the masses. For my buddies who didn’t make it back that tax was truly the “death tax.” They died so that those who didn’t could live in a land where they had the freedom and opportunity to build wealth. Now the Government of the People is asking the heirs of those who enjoyed the freedom to make those fortunes to give a little back. I think that is just and proper. One can quiblble about the wealth level upon which it should be imposed, and about the rate, but the concept is perfect.
I think we should rename the estate tax as ‘Society Tax’. People should enjoy more of their money which they have earned. But when they die their children and grand children should not get all of it. The person who died belongs to the society too and the people of the society who nourished the person directly or indirectly should get part of his/her left over money. It is up to the person whether s/he should give it away through his/her own choice of charity or through IRS/Govt. We live in America and not in a country of Monarch & Kings.
Children and Grandchildren should not enjoy more than they contributed to nourish the person.
not what i was looking for , say if i wanted to give 3 or 4 kids 10 to 20000 thousad each
I feel that I have the obligation to distribute my wealth as my concience directs, If I choose to give away my money to others, ie charaties, individuals, etc. I should have the right to do so without restrictions. I should not have the government tell me who I can give my money to. I know that there are others who are in need, but then there are others who squandered their wealth on personal luxuries and then trun to the government for a handout from those of us who have worked hard, saved and invested wisely.