Is the estate tax still a thing? If your estate is over $5.4 million you may be susceptible to the Federal Inheritance and Estate Tax, also sometimes coined as the death tax. Signals from Congress hint that the death tax may be on its last leg. Do you know how the death tax will effect your estate and your family’s inheritance.
- Sen. John Thune a Republican out of South Dakota has drafted a bill that has Republican law makers lining up to sign up to bring an end to the federal estate tax. His mantra? Lets stop the IRS from punishing American’s “for a lifetime of hard work.”
- Is that what the death tax is for? To punish the wealthy?
- Last week, the Senate adopted an amendment to the Fiscal Year 2016 budget proposed by Thune that would create a deficit neutral reserve fund to eliminate the death tax. This proposal was adopted by the Senate in a 54-46 vote.
- He has also put a separate bill into consideration that would permanently eliminate the tax, he has 27 senators signed on to support him there.
- Rep. Kevin Brady, a Republican from Texas has introduced what is called a companion bill in the House to eliminate the federal estate and inheritance tax.
Is this the only changes being proposed to the death tax? Far from it.
- Earlier this year the president proposed changing the death tax to levy new capital gains tax on inherited assets totaling more than two hundred thousand acquired by married couples or more than one hundred thousand for single individuals.
- In other words right now if an individual dies and leaves their child something valuable (for our example lets assume its ownership interest in a valuable company) no capital gains tax would be due and if the estate was below 5 million dollars then the estate tax does not apply.
- The presidents plan would place a capital gains tax on such an inheritance.
So what does all this mean and whats the right answer?
- Should death be a taxable event?
- Just because you produced great wealth in your life should you be able to use the courts to transfer all that wealth and not put a dime into the system to help fund the courts and other necessary parts of a civil society?
- Who benefits more from the court system the rich or the poor? Is it right to only place the burden of the death tax on the rich?